Frequently Asked Questions
How did you work it out?
I am not a specialist in this area of property law, I am a programmer with a maths degree. I read a few worked examples of how the cost of buying the share of freehold is calculated on the web, and reverse engineered the maths. I read several papers and articles on the web to get some background. It transpired that although there is a lot of subjectivitiy surrounding what the cost of buying a given share of freehold should be, the disputes seems to be more about the value of certain variables that you feed into this arcane calculation, than the actual formula for the calculation.
There was also some data available showing how the cost of buying the freehold increases dramatically as the lease shortens and I use some of this data to generate some suggested values for the 'Present Relative Value' or 'Relativity', which is based on the length of the lease.
The calculation is also very sensitive to the 'Yield Rate' and the 'Reversion Rate' and it is these variables that the freehold owners often seem to dispute to try and drive up the cost of buying the freehold. This are various of 'discount rates' used in the various Net Present Value calculations within the estimate. A recent landmark "Leasehold Valuation Tribunal" case, refered to as "Cadogan v Sportelli", set the precedent for what these disputed variables should be.
How do you know what the percentage 'relativity' should be?
There is no definitive source of relativity percentage versus years left on leaase, which is one of the fundamental frustrations of arriving at valuations. I took an average of the data published from various sources that were valid across Greater London, England and Wales and checked this against data published by the leasehold advisory service. It was within a few percentage points in most cases. This document provides some interesting research too if you want to research the numbers yourself : RICS RESEARCH Leasehold reform : graphs of relativity.
Is it accurate?
I wrote this calculator for my own use initially, to try and work out how much it was going to cost me to buy the share of freehold in my own block of flats. I plugged in the numbers for my own property initially but had no idea whether it was accurate. I was plesantly suprised when I got a letter from the lawyers in the mail indicating that my own calculation was very close to theirs. Thats when I decided to tidy up the calculator and make it availble online so that others would not have to go through the frustration! However, I am offering this free of use so I am certainly not prepared to take any responsibility for guaranting it's accurate.
Why did you bother?
I think having the legal right to buy a share of your freehold through collective enfranchisement is great thing. However, the process still seems horribly complicated and unnecessarily obtuse. I hope this simple calculator will help provide some insight into how the calculations are done, and how the lawyers arrive at their numbers.
Where can I find out more?