We have all been familiar with the workings of long residential leases and enfranchisement of houses for so many years that the old adage that familiarity breeds contempt, or at least carelessness, could be an accusation levelled at some property professionals.

A situation has come to light in Redditch which has made approximately 2000 houses, built less than 20 years ago, virtually unsaleable, until the interpretation of the rent review clause has been decided by the lands tribunal.The Leasehold Reform Act 1967 endeavoured to alleviate the problems faced by long leaseholders on exp iry of their leases.

Although entitled to remain in occupation, it was as tenants under the Landlord and Tenant Act 1954, paying 'fair rents', whereas previously they were essentially 'owner occupiers' paying a nominal ground rent.The legislation attempted to protect the tenants of houses that were held on long leases at low rents by allowing them to compulsorily acquire their freeholds, or compel the landlord to grant a 50-year extension.

By a process of legal attrition the ambit of entitlement has broadened, much to the favour of the leaseholders.In the 99-year residential leases granted by Redditch Development Corporation the ground rent was about £30, payable from the start of occupation and increasing every 33 years to 'such annual rents (being not less than the rent firstly herein before reserved) as shall be ascertained by reference to current open market ground rent levels'.Many houses were sold on these terms until a purchaser's solicitor spotted the potential problem and raised the issue with the development corporation.

They amended leases from that date to state explicitly the reviewed rents payable from 33 to 66 years to about £60 and £90 respectively.

This restricted the cost of enfranchising to an acceptable level (about £800).

At the same time they offered the leaseholders with a variable ground rent review the opportunity to fix their rent increases.The problem is now with the houses where those options were not taken up.

Had the freehold reversions stayed in the ownership of the development corporation, or their successors in title, the Commission for New Towns, the issue may never have come to light, but over 1000 reversions were disposed of in 1991 and 1992 to Redditch council and a number of commercial enterprises.

Before disposing of the assets of the new town, the commission wrote to the leaseholders offering to sell them their freeholds for approximately £800.

This price represents 16 times the passing rent plus expenses - it disregarded the review clause.Those who did not take up the offer were reassured by various property professionals, including building society managers, that there would be no practical effect of the sale of the freeholds to a commercial organisation, other than the name of the payee on the ground rent cheque would be different.

However, the freeholders now interpret the rent review clause literally to mean a review to an 's.15 rent' or 'a modern ground rent'.

For the purpose of the 1967 Act, a modern ground rent is basically the letting value of the site, disregarding any value attributable to its current use.To establish the modern ground rent, evidence of comparable cleared site transactions is preferred.

As this is rare the courts have approved the implementation of artificial methods to establish rent levels.

These approaches attempt to distinguish between the value attributable to the land, and that value generated by the buildings upon it.

As a rule of thumb, 30% of the total is considered to be 'bare site value'.

A modern ground rent is usually an income return on the capital value of the land.

This return is usually at a 6 to 7% rate.For example, if the market value of land and buildings is £60,000, and 30% attributable to undeveloped site is £20,000, the 'modern ground rent' return of 7% will be £1400.This modern rent is usually deemed to be receivable by the landlord for the reversion of the 50-year extension, ie it represents his loss in the value of the land.

It is rare for freeholders to gain such a return during the term of a building lease.

The Lease hold Valuation Tribunal was asked to determine a valuation under s.20 of the Leasehold Reform Act 1967 and heard arguments as to the meaning of the rent review clause.The leaseholders' arguments were based on the intentions of the original freeholders.

The tribunal, however, came down largely on the side of the freeholders, who said that the terms of the review might justifiably be felt to be 'unreasonable and unpredictable', but there was no requirement that it should not be so.

They arrived at this decision 'with some reluctance'.

The matter is now at the lands tribunal.There are a number of issues that need to be addressed in relation to enfranchisement.

The initial problem is for Redditch leaseholders, who are in limbo until a decision is made, and even then they may face a hugely increased cost of enfranchising.

The knock-on effect of that may well be litigation against the lawyers and surveyors who acted for the leaseholder.The broader implications of this case should be taken on board by all lawyers dealing with long residential leases.

Part of the problem may stem from lack of integration between the professions.

Lawyers are not taught valuation or the implications of the formulae for calculating the value of the freehold reversion.

They should either familiarise themselves with the consequences of rent reviews, or make sure that the surveyor is given the lease to consider when valuing a property.

If the responsibility is to be with the surveyor then that must be made clear so that he or she understands when valuing a property for a purchaser, with or without a mortgage, that the valuation is based on all terms of the lease.

The client is paying the penalty for having employed, and payed for, two professionals who may not communicate satisfactorily with each other.It should not always be assumed that the cost of enfranchising is a fairly minor financial issue unless the property is very valuable or the lease very short.

The occupants of houses in Redditch, who bought modest houses on long leases in good faith from a public sector body, can denounce that particular misconception.