In simple terms, market value refers to the estimated amount for which your property could be sold on the open market at the valuation date, assuming a willing buyer and a willing seller, both acting knowledgeably, prudently, and without compulsion.
Market value is a critical component in the calculation of lease extension premiums, since the figure is used to establish the baseline against which other elements — such as lease length, ground rent, and marriage value — are assessed.
📖 The official definition (RICS Global Standards)
According to the Royal Institution of Chartered Surveyors (RICS) Global Valuation Standards (“the Red Book”), market value is defined as:
“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”
This globally recognised definition ensures that valuations are carried out consistently, transparently, and to internationally accepted standards. At extension.lease, all of our surveyors work in accordance with the RICS Red Book and best practice guidance.
🔑 Market value in the context of lease extensions
When determining a lease extension premium under the Leasehold Reform, Housing and Urban Development Act 1993, the market value of your flat or house plays a central role. It is used to assess:
- The difference between the property’s value with the current lease and with the extended lease.
- The level of marriage value (if the lease has dropped below 80 years).
- The freeholder’s “loss” when giving up their future rights to ground rent and reversionary interest.
⚠️ The special assumption: disregarding tenant’s improvements
The law requires valuers to apply a special assumption when assessing market value for lease extension purposes:
- Tenant’s improvements must be disregarded.
- This means that any works or upgrades carried out by the leaseholder (for example, installing a new kitchen, bathroom, or loft conversion) should not artificially inflate the market value used in the calculation.
This rule ensures fairness, as the premium should reflect the inherent value of the property and lease terms — not the additional investment a leaseholder has made in improving their home.
📊 How we determine market value
Our surveyors use a combination of:
- Latest market data from the Land Registry and other transactional evidence.
- Comparable sales analysis of similar properties in the area.
- Professional judgment guided by RICS standards and relevant Tribunal case law.
By combining these sources, we provide a robust and defensible valuation that ensures you pay a fair premium — and not a penny more.
✅ Summary
Market value is the foundation of the lease extension premium calculation. Defined by RICS Global Standards, it represents the fair price your property would achieve on the open market, but under the statutory process it must be assessed on the special assumption that any tenant’s improvements are disregarded.
At extension.lease, our RICS-qualified and registered valuers specialise in producing accurate market valuations for lease extensions. By applying the correct methodology and case law, we ensure your premium is calculated fairly and transparently.
