It would be unwise to apply for an extension of your lease without getting advice at an early stage from an expert (an appraiser who is familiar with this legal field and has a good knowledge of the local real estate market). Your landlord can accept your offer or offer their own offer price in response. Hopefully, you and your landlord will negotiate the price of the new lease. If you can`t agree on the price, you or your landlord can go to the First Tier Court (Property Chamber), which has the power to determine the price if you can`t agree otherwise. By law, the value of the interest you would receive as a result of the new lease should be calculated as if the general market lease were sold by a willing seller to a willing buyer. The principles of the law are not to make you a good deal, but to properly compensate your landlord for the depreciation of his property by ensuring that you pay a fair price based as precisely as possible on free market values. It is difficult to assess an open market value in the artificial situation created by the need to protect your rights. The shorter the lease, the lower this „gain“ will be until it disappears completely. You need to evaluate the value you can earn by comparing the price to be paid for the new lease with the increase in the value of the apartment that the new lease will create. Of course, it would be unwise to agree on a higher price than the expected increase in the value of your home. This note is not intended as a „Do-it-yourself“ guide to evaluating your own lease renewal. You should seek professional advice as early as possible in the process. In this example, we believe that granting a new lease could result in an increase in the market value of the apartment of around 10%, resulting in a future value of £165,000.
Calculate the current value of the advantageous rental conditions over the term of the lease agreement. Multiply the annual savings generated by the relatively small decrease in rental charges by the corresponding present value factor. You can estimate the annual savings generated by inheritance interest by deducting the actual rental costs from the market-appropriate rental costs. Use the weighted average cost of capital, also known as the discount rate, to calculate the present value factor.