valuation fees
📖 What is valuation fees? Meaning and definition
Valuation fees cover the cost of obtaining a professional valuation of a property. This valuation is often required in situations where a tenant is seeking to extend their lease or participate in a collective enfranchisement, which involves purchasing the freehold of their building. The purpose of such a valuation is to determine amounts payable, such as the premium for a new lease or the purchase price for a freehold.
Under the Leasehold Reform, Housing and Urban Development Act 1993, tenants are generally liable for the landlord's reasonable costs incurred in connection with a new lease, which can include valuation fees. The First-tier Tribunal often reviews these fees to ensure they are reasonable and fair, considering factors like the complexity of the task, the skill level required, and consistency with charges made by other professionals for similar work.
For a valuation fee to be considered reasonable, the services provided must be necessary and the cost should align with what might be expected if the person incurring the cost was personally liable for it. Tribunals may disallow fees if they find them to be excessive, for example, if multiple valuers were used without clear justification for a routine transaction, or if the cost is deemed an overhead rather than a directly incurred expense.
📋 Requirements
- The valuation must be obtained for specific legal purposes, such as fixing a premium for a new lease or determining a purchase price.
- The fees must be reasonable and fair, consistent with charges for similar work by other Chartered Surveyors.
- The professional services must be reasonably expected to have been incurred if the payer was personally liable for all such costs.
- The valuation should involve a site visit and analysis of comparable evidence where appropriate.
📝 Procedure
- A tenant gives notice under Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 for a new lease.
- A valuer is instructed to value the tenant's flat for the purpose of fixing the premium or other amounts payable.
- The valuer prepares a statutory valuation report, which may include a site visit and analysis of comparable evidence.
- The fees charged by the valuer are submitted for payment, often subject to review by a tribunal for reasonableness.
💡 Examples
- A tenant applying for a lease extension is charged £780 inclusive of VAT for valuer fees, which a tribunal determines to be reasonable and fair for that type of valuation.
- In a collective enfranchisement case, initial valuation fees of £1,500 plus VAT for valuing two flats and determining the purchase price are found to be reasonable by the Tribunal, as it involved preparing a statutory valuation and a site…
- A tribunal disallows an additional valuer's fee of £375 because the transaction was considered routine, and the primary valuer should have been capable of handling the valuation alone without extra assistance.
- A landlord incurs valuation fees as part of a tenant's lease extension claim, and these costs are payable by the tenant as part of the statutory costs under the 1993 Act.
📚 Legal basis
- Leasehold Reform, Housing and Urban Development Act 1993
❓ Frequently asked questions
What are valuation fees in the context of a lease extension?
In a lease extension, valuation fees are the charges for a professional valuer's assessment of your flat's value, which is used to calculate the premium you will pay to extend your lease. These fees are typically payable by the tenant to cover the landlord's reasonable costs.
Are valuation fees always reasonable?
Not always. While tenants are liable for reasonable costs, a tribunal can review the fees to ensure they are fair and consistent with market rates for similar work. If fees are deemed excessive or unnecessary, they may be reduced or disallowed.
Who pays the valuation fees for a lease extension?
Under the Leasehold Reform, Housing and Urban Development Act 1993, the tenant is generally liable for the reasonable valuation fees incurred by the landlord in connection with their lease extension application.
What makes a valuation fee 'reasonable'?
A valuation fee is considered reasonable if the services were necessary, the cost reflects what might be expected if the person paying was personally liable, and it aligns with charges from other Chartered Surveyors for similar work, taking into account the complexity of the task.
Can I dispute valuation fees?
Yes, if you believe the valuation fees charged are unreasonable, you can dispute them. The First-tier Tribunal often determines the reasonableness of such costs, considering factors like the complexity of the work and consistency with other charges.