a

the value of the interest of the tenant under his existing lease shall be determined in accordance with paragraph 4A;

aa

the value of the interest to be held by the tenant under the new lease shall be determined in accordance with paragraph 4B;

4A

1

Subject to the provisions of this paragraph, the value of the interest of the tenant under the existing lease is the amount which at the valuation date that interest might be expected to realise if sold on the open market by a willing seller (with neither the landlord nor any owner of an intermediate leasehold interest buying or seeking to buy) on the following assumptions—

a

on the assumption that the vendor is selling such interest as is held by the tenant subject to any interest inferior to the interest of the tenant;

b

on the assumption that Chapter I and this Chapter confer no right to acquire any interest in any premises containing the tenant’s flat or to acquire any new lease;

c

on the assumption that any increase in the value of the flat which is attributable to an improvement carried out at his own expense by the tenant or by any predecessor in title is to be disregarded; and

d

on the assumption that (subject to paragraph (b)) the vendor is selling with and subject to the rights and burdens with and subject to which any interest inferior to the existing lease of the tenant has effect.

2

It is hereby declared that the fact that sub-paragraph (1) requires assumptions to be made in relation to particular matters does not preclude the making of assumptions as to other matters where those assumptions are appropriate for determining the amount which at the valuation date the interest of the tenant under his existing lease might be expected to realise if sold as mentioned in that sub-paragraph.

3

In determining any such amount there shall be made such deduction (if any) in respect of any defect in title as on a sale of that interest on the open market might be expected to be allowed between a willing seller and a willing buyer.

4

Subject to sub-paragraph (5), the value of the interest of the tenant under his existing lease shall not be increased by reason of—

a

any transaction which—

i

is entered into after 19th January 1996, and

ii

involves the creation or transfer of an interest inferior to the tenant’s existing lease; or

b

any alteration after that date of the terms on which any such inferior interest is held.

5

Sub-paragraph (4) shall not apply to any transaction which falls within paragraph (a) of that sub-paragraph if—

a

the transaction is entered into in pursuance of a contract entered into on or before the date mentioned in that paragraph; and

b

the amount of the premium payable by the tenant in respect of the grant of the new lease was determined on or before that date either by agreement or by a leasehold valuation tribunal under this Chapter.

4B

1

Subject to the provisions of this paragraph, the value of the interest to be held by the tenant under the new lease is the amount which at the valuation date that interest (assuming it to have been granted to him at that date) might be expected to realise if sold on the open market by a willing seller (with the owner of any interest superior to the interest of the tenant not buying or seeking to buy) on the following assumptions—

a

on the assumption that the vendor is selling such interest as is to be held by the tenant under the new lease subject to the inferior interests to which the tenant’s existing lease is subject at the valuation date;

b

on the assumption that Chapter I and this Chapter confer no right to acquire any interest in any premises containing the tenant’s flat or to acquire any new lease;

c

on the assumption that there is to be disregarded any increase in the value of the flat which would fall to be disregarded under paragraph (c) of sub-paragraph (1) of paragraph 4A in valuing in accordance with that sub-paragraph the interest of the tenant under his existing lease; and

d

on the assumption that (subject to paragraph (b)) the vendor is selling with and subject to the rights and burdens with and subject to which any interest inferior to the tenant’s existing lease at the valuation date then has effect.

2

It is hereby declared that the fact that sub-paragraph (1) requires assumptions to be made in relation to particular matters does not preclude the making of assumptions as to other matters where those assumptions are appropriate for determining the amount which at the valuation date the interest to be held by the tenant under the new lease might be expected to realise if sold as mentioned in that sub-paragraph.

3

In determining any such amount there shall be made such deduction (if any) in respect of any defect in title as on a sale of that interest on the open market might be expected to be allowed between a willing seller and a willing buyer.

4

Subject to sub-paragraph (5), the value of the interest to be held by the tenant under the new lease shall not be decreased by reason of—

a

any transaction which—

i

is entered into after 19th January 1996, and

ii

involves the creation or transfer of an interest inferior to the tenant’s existing lease; or

b

any alteration after that date of the terms on which any such inferior interest is held.

5

Sub-paragraph (4) shall not apply to any transaction which falls within paragraph (a) of that sub-paragraph if—

a

the transaction is entered into in pursuance of a contract entered into on or before the date mentioned in that paragraph; and

b

the amount of the premium payable by the tenant in respect of the grant of the new lease was determined on or before that date either by agreement or by a leasehold valuation tribunal under this Chapter.