News story

6% deferment rate for flats

In Zuckerman and others v the Calthorpe Estate the Lands Tribunal recently overruled the Midlands Leasehold Valuation Tribunal in determining that the deferment rate for a lease renewal under the Leasehold Reform Housing and Urban Development Act 1993 should be 6%. The deferment rate is the annual rate of return that an investor would look to achieve if they were to acquire the reversion to a leasehold property.

Following Sportelli 5% has been at least the starting point, and often on the evidence the eventual deferment rate. In this case , the Lands Tribunal , in light of the evidence adduced, determined that (a) the risk premium should be increased to 5.25% and that the management allowance should be increased to 0.5%. These uplifts resulted in an overall deferment rate of 6%. The premiums for the new leases were reduced accordingly from £9,887 to £8,150 and £9,843 to £8,100, respectively.

(News story added: 1 December 2009)