Relativity: An introduction
The following provides an introduction to the concept of relativity, particularly for leaseholders.
Once the lease length of a property has fallen below 80 years it is said to be worth less than its full value. For every year the lease length continues to fall, it loses even more of its value. This is known as ‘relativity’.
When a leaseholder extends their lease, they are directed – by law – to pay 50% of the resulting uplift in the property’s value; the lower the relativity, the more money the freeholder receives, so it has always been in their interests to ‘prove’ low relativity. Over the course of the past two decades, professionals in the sector have produced a series of ‘relativity graphs’, which offer ‘evidence’ from lease extension cases with which they had dealt. The majority of these ‘proved’ low values on flats with low leases, which ultimately ensures a greater return for freeholders to the detriment of leaseholders.
The Leasehold Valuers Relativity
The Leasehold Valuers Relativity Graph 2017 provides an alternative to these existing relativity graphs and we are con?dent that it is one of the least subjective relativity graphs now available to enfranchisement practitioners.
The Leasehold Valuers Relativity Graph 2017 is purely based on settlement evidence, incorporating 503 relativities agreed over a two-year period within the Greater London area (i.e. inside the M25 orbital motorway), but outside Prime Central London (PCL).
We have only used data from transactions whereby an individual leaseholder (not being part of a group) had a professional freeholder, which was represented by an enfranchisement expert. The graph disregards tribunal decisions.
For each of the 503 settlements analysed, a relativity percentage had been expressly determined or all other factors had been previously agreed and the only component remaining in dispute was the relativity to apply. Each lease had between 30 and 79.9 years unexpired (any relativities on the graph outside these parameters are for continuity purposes only).
To receive a full copy of the Leasehold Valuers Relativity Graph 2017, together with a more in-depth explanation of how it was constructed please email us.