Valuation
The value of the freehold interest comprises:
- A multiple of the current annual ground rent payable, which will depend on
- the outstanding term of the lease
- any future scheduled increases in the level of ground rent
- market interest rates
- the probability of default
- if the rents for individual flats etc are small, the cost of collection
- The net present value of the reversion, i.e. at the end of the lease the freeholder (to whom the rent is paid) will probably be fully entitled to the property, so the shorter the lease the greater the reversion value.
- Any attributable "marriage value" (a substantial sum designed to compensate freeholders for their loss of interest when a lease with less than 80 years to run is extended).
Read more about this topic: Ground Rent