Glossary of Terms

Appurtenant property  Any garage, outhouse, garden, yard or appurtenances belonging to, or usually enjoyed with, the flat under a lease.
Capitalisation rate  The investment yield applied to the ground rent to calculate the value of the term as part of the landlord's interest. 
Collective enfranchisement  The collective purchase of the freehold by leaseholders in a building containing flats in accordance with the 1993 Leasehold Reform Housing and Urban Development Act, as amended by the 2002 Commonhold and Leasehold Reform Act.
Deferment rate  The investment yield applied to the freehold/long lease flat value in calculating the value of the landlord's reversion. 
Demise The extent of the flat or house granted as defined under a lease.
Development value A factor taken into account for assessing freehold purchase of flats and houses. It refers to the value of any potential development leaseholder(s) can undertake following acquisition of the freehold. For example, leaseholders acquiring the freehold of a building may be able to unlock value by converting the property back into a single house or developing the roof.
Enfranchisement The purchase of a freehold interest in a house by the leaseholder.
First-tier Tribunal The First Tier Tribunal (Property Chamber) has five regional offices throughout England that deal with the settling of disputes on leasehold property and the private rented sector including  service charge disputes, lease variations and the determination of premiums for freehold purchase and lease extensions. This tribunal covers matters previously heard by the Leasehold Valuation Tribunal in England.
Freehold The ultimate title in property. The owner of a freehold owns the building, and the land it stands on, outright and forever.
Freeholder

Owns the freehold of a property which can include a building and other property or land.

In a block of flats, for example, the freeholder would own the land and the actual building. A leaseholder will own a flat within that property on a lease for a fixed length of time, but the freeholder will own the property outright. The freeholder is usually responsible for the repair and maintenance of the exterior and common parts of the building but may have passed this onto for example a Residents Management Company. At the end of the lease, the flat ownership reverts to the freeholder.

Freehold vacant possession value The value of the property on a freehold basis i.e. not a wasting leasehold.
Ground rent A rental payment made to the landlord usually annually or quarterly which can be fixed for the length of the lease or more frequently reviewed every 25 or 33 years by increasing by the amount of the original rent or doubling it. More recently developers have been using 10 year review patterns and increases according to the increase in the property’s values.
Headlease This is usually a superior lease over a building. Out of this headlease subleases are granted. The most common scenario is a headlease over a building containing flats which in turn grants subleases to individual flats in a building.
Hope value The value that can be attached to potential benefits leaseholders will gain when they buy the freehold from their freeholder. For example, when leaseholders buy the freehold they may gain a benefit whereby a leaseholder who did not participate in the purchase pays the new freeholder money for a lease extension.
Lease A wasting asset which reduces in value as the term shortens. On expiry the property reverts to the landlords subject to any rights of possession, for example, an assured tenancy at a market rent.
Lease extension A residential lease is granted for a specific term. At the expiration of this term, the property reverts to the landlord. Once a lease has been granted the term immediately begins to shorten. If you wish to sell a leasehold property, you may need to extend the lease to maintain its value. The 1993 Act gives the right to an additional 90 year term at a premium.
Marriage value The overall gain in extending the lease or buying the freehold. In simple terms it is the value of the extended/freehold property less all the interests (landlords and existing lease value). 50% of the marriage value is paid to the landlords.
Onerous ground rent Where the level of rent is more than 0.05% -0.25% of the freehold vacant possession value. Above this it depresses the value of the property.
Participation agreement Used to record the terms on which a leaseholder joins a Collective Enfranchisement or Right of First Refusal claim. It will usually set out how much each leaseholder is liable to contribute to the purchase price.
Peppercorn The lowest form of legal consideration. It really is a peppercorn (take one out of your pepper mill and post it to your landlord – but only if it is legally demanded!).
Premium The sum of money the leaseholder pays for a longer lease.
Reversion The value of the landlords right to receive the property back at the end of the lease.
Relativity The relationship between the freehold vacant possession value of a property and the existing lease value. It is used to calculate the marriage value.
Term

The period of time for which a lease is granted. Long leases are frequently granted for a term of 99 years or more.

It is also the compensation payable to the landlord for the loss of the ground rent investment.

 Upper Tribunal The tribunal that, in addition to other matters, hears appeals from the First Tier Tribunal (Property Chamber). Decisions of the Upper Tribunal are binding on the First Tier Tribunal.

Re-instatement cost assessment enfranchisement glossary

BCIS  Building Cost Information Service (RICS).
Condition of average Whereby the declared value is deemed to be under-assessed, the claim is reduced by the same ratio.
Declared value  The cost of reinstatement required by the insurer/broker to assess the insurance premium.
Elemental cost assessment Detailed assessment of the declared value by calculating the individual component costs.
Sum insured The insurer/broker gears the declared value up by 15-30% for cost inflation over the period of the total potential claim/reinstatement period.
VAT For residential buildings, VAT is NOT payable in the event of a total claim. It may well be payable for a part claim. Insurers may require the VAT element to be insured to avoid a Condition of Average situation.

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