The Royal Institution of Chartered Surveyors (RICS) is adjusting its unexpired lease term assumption from 70 years to 85 years.

The organisation has acknowledged that the change, unveiled in its revised Red Book of professional standards, might cause concern to lenders and valuers alike.

However, RICS has stressed it is "merely a valuation assumption", rather than a hard rule for mortgage lenders to follow.

Indeed, it said mortgage lenders will continue setting their own rules and basing them upon their view of a suitable lease length on which to determine lending.

RICS has argued that continuing with the 70 years figure creates a "grey area" for valuation, as it implicitly requires the valuer to reflect the costs associated with lease renewal.

This means as time goes on, a growing number of leases for properties built in the 1980s and 1990s will start moving into the category of fewer than 80 years unexpired.

As a result, it will require payment of marriage value on enfranchisement or the granting of a new lease.

RICS pointed out that enfranchisement valuation is "outside the remit of the valuation for mortgage lending purposes". It is therefore important that valuers are able to reflect the property's full value rather than be forced to carry out more complex enfranchisement calculations.

The organisation added that it is prepared for a transition period as the industry gets used to this new system. However, RICS said it feels the reforms are necessary in light of the current market situation.

Mark Vinall, a partner at Winckworth Sherwood who specialises in enfranchisement and conveyancing matters, commented: "The way in which flat leases are valued for lenders has changed and this may affect the sales process; RICS, the professional body for surveyors, have ‎amended the basis of valuation so that going forwards they will assume a flat lease has 85 years left to run where they do not have a copy of the lease at the point of producing their valuation. This is because, as they put it, "enfranchisement valuation is outside the remit of valuation for mortgage lending purposes".
"This will no doubt cause lenders to amend their instructions to require their solicitors to report where the lease term is in fact lower. It may introduce a layer of potential delay and cost while the lender obtains advice on the point from a specialist valuer in cases where the actual lease term is less than 85 years.  This may be magnified where the lease was not in the hands of the lender’s surveyor at the time of inspection.. 
"The likelihood is that they would then be advised of a lower value and that may affect the borrower's ability to proceed with the purchase at the price that had been agreed.
"So sellers of flats on leases ‎with less than 85 years remaining and their agents will need to think carefully about how best to deal with this before they come to the market. We are happy to help."