Lease Extension with very short term remaining

[MikeGreene]

Theoretically, if one has a flat with just 1 year remaining on the original lease, a peppercorn rent and the right to extend for 90, would the premium be almost exactly the same as the cost of buying the flat with a new 90 year lease?

I am really asking to check that my understanding of Landlord's and Tenant's Interests and Marriage Value are correct.

As an extension, say one has a flat with say 20 years left and a £100 Ground Rent, where the improved value was say £300K. Would I be right to assume the Relativity might be around 40% and so the cost of a 90-year extension around £140-150K ?

Many thanks for bearing with me and hopefully sharing the know-how!

[jeffrey]

Theoretically, if one has a flat with just 1 year remaining on the original lease, a peppercorn rent and the right to extend for 90, would the premium be almost exactly the same as the cost of buying the flat with a new 90 year lease?
No, because- even at this late hour- you as T do have statutory rights whereas a newcomer lessee would not.
Get that s.42 Notice served at once (assuming that you've owned for at least two years).
Why have you left the problem until now with just one year unexpired?

[MikeGreene]

Sorry. I was trying to ask a theoretical question to understand if my understanding of the sums is correct. (I am in fact wondering about a property I have been offered with 22 years left where the current tenant has not/will not serve a s42, so there will be 20 yrs left by the time I could serve one.)

In the theoretical case of just 1 year left, would I be right in suggesting that the Relativity would be very low (say 3%) and so the Marriage Value very low and the Landlord's Interest would account for almost the entire open-market Improved value?

[jeffrey]

Even were that so, T (if resident) would not be homeless. The Local Government and Housing Act 1989 confers on such T, on lease expiry, the benefit of a statutorily-created SAT. This factor alone (and its nuisance value) surely causes a reduction in the freehold reversion's value.

(But I'm no surveyor. Await the arrival of someone more expert than I in valuation methodology.)

[MikeGreene]

Thanks, Jeffrey.

Hopefully a Valuation expert might be able to help?