Lease extensions: the basis of the market value
3(1)This paragraph applies to a lease extension.
(2)It must be assumed that—
(a)the current lease will continue on the terms on which it is granted, and therefore will not be substituted by the statutory lease;
(b)the current lease will continue (on those terms) until its term date;
(c)a notional lease is granted out of the interest of the person granting the statutory lease;
(d)the notional lease is subject to, and enjoys the benefit of, the current lease (and therefore enjoys the right to receive the rent payable under the current lease);
(e)the term of the notional lease begins on the date for valuation;
(f)subject to that, the terms of the notional lease are the same as the terms of the statutory lease that will be granted under the LRA 1967 or the LRHUDA 1993, including the peppercorn rent (and any other rent payable under a shared ownership lease in respect of the landlord’s share), the property demised, and the term expiring 990 years after the term date of the current lease.
(3)But if the tenant is holding over under the Local Government and Housing Act 1989 at the valuation date—
(a)in the assumption in sub-paragraph (2)(a), the reference to the terms on which the current lease is granted has effect as a reference to the terms on which the tenant is holding over under that Act;
(b)the assumption in sub-paragraph (2)(b) does not apply.
(4)Paragraph 21 makes provision about whether any right to hold over under the Local Government and Housing Act 1989 is to be taken into consideration in determining the market value of the notional lease (if the tenant is not holding over under that Act at the valuation date).
(5)The market value is the amount which the notional lease could have been expected to realise if it had been sold on the open market by a willing seller at the valuation date.
(6)In the following provisions of this Schedule, that market value is referred to as the market value of the notional lease.