Selling freehold

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  • Selling freehold

    I wish to sell a freehold to the two leaseholders.

    Would this be the appropriate basis for valuation:
    Discount rate for income: 7.5%
    Discount rate for reversion: 5.0%


    Using the parameters below I have calculated the value of purchasing the freehold for the two leaseholders as I wish to use a fair price as the start of any discussions.

    Leaseholders: 2
    Location: Wandsworth, SW18, London
    Property Value: £400,000 each
    Term: 125 years
    Ground Rent 0-25yrs: £150 each
    Ground Rent 26-50yrs: £250 each
    Ground Rent 51-75yrs: £400 each
    Ground Rent 76-100yrs: £600 each
    Ground Rent 101-125yrs: £800 each

    Calculated Price
    Value of ground rent: £2,285 each
    Value of reversion: £898 each
    Total: £3,138 each.

    Please can you let me know if this makes sense. If this were to go to the LVT what would they do differently???

    Many thanks for any help.

    Richard

  • #2
    1. Are these two flats or houses?
    2. Do they want to buy, or do you want to sell?
    3. If it's they, have they served a formal Notice on you [1993 Act]?
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

    Comment


    • #3
      Jeffrey,

      1. Are these two flats or houses?
      - 2 flats within a conversion (of 2).

      2. Do they want to buy, or do you want to sell?
      - I am considering selling and am going to offer to them (informally at first).

      3. If it's they, have they served a formal Notice on you [1993 Act]?
      - No notice has been served either way.

      Richard

      Comment


      • #4
        Your offer should comply with one of the LTA 1987 procedures; see s.5 and the sections following.
        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
        4. *- Contact info: click on my name (blue-highlight link).

        Comment


        • #5
          Jeffrey,

          I wish to start a dialogue with the leaseholders first of all. I am happy to serve the requisite notices once I have ascertained their interest.

          i.e.
          Serve notice - so that they can buy (necessary?)
          Serve notice - so I can sell at auction
          No notice - keep the freehold.


          Richard

          Comment


          • #6
            Originally posted by RichA View Post
            I wish to sell a freehold to the two leaseholders.

            Would this be the appropriate basis for valuation:
            Discount rate for income: 7.5%
            Discount rate for reversion: 5.0%


            Using the parameters below I have calculated the value of purchasing the freehold for the two leaseholders as I wish to use a fair price as the start of any discussions.

            Leaseholders: 2
            Location: Wandsworth, SW18, London
            Property Value: £400,000 each
            Term: 125 years
            Ground Rent 0-25yrs: £150 each
            Ground Rent 26-50yrs: £250 each
            Ground Rent 51-75yrs: £400 each
            Ground Rent 76-100yrs: £600 each
            Ground Rent 101-125yrs: £800 each

            Calculated Price
            Value of ground rent: £2,285 each
            Value of reversion: £898 each
            Total: £3,138 each.

            Please can you let me know if this makes sense. If this were to go to the LVT what would they do differently???

            Many thanks for any help.

            Richard
            Richard your calculation on income is not quite right; at 7.5% it is £2,006 however the figure for the reverion is correct.

            Comment


            • #7
              Two leaseholds valued at £400000 each in Wandsworth? Snap! (nearly - I'm in Balham)

              For your interest I have recently employed a Surveyor to calculate the value of my freehold and she used 6% as the discount rate for income. The same surveyor used 7% when doing a lease extension.

              Regards

              Comment


              • #8
                Originally posted by sgclacy View Post
                Richard your calculation on income is not quite right; at 7.5% it is £2,006 however the figure for the reverion is correct.
                Not sure what's gone on there. I thought it was a PV calc. I have assumed payment at end of year)

                00 - 25 yrs @ £150 = £1,672
                26 - 50 yrs @ £250 = £457
                51 - 75 yrs @ £400 = £120
                76 - 100yrs @ £600 = £29
                101- 125yrs @ £800 = £6

                Total = £2,285


                Anyhow, £2,285 v £2,206 is not a huge difference so I am in the right ball park to start the discussions.

                Comment

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