Collective enfranchisement valuation?

[Bea]

Dear All,

Please can you provide advice on how to value the freehold of our property. The freehold is currently held by another, we are 1 of 3 leaseholders in the building

The average flat price is £450K

The ground rent is £250 per annum per flat

The leases are all between 99-105yrs

We believe there to be unreleased development potential within the property, although these areas areas are currently not demised to any of the 3 flats. The potential extensions are as follows (many similar extensions are present on the neigbouring properties).

1- Demise of front garden to ground floor flat would enable a front light well to be created. Excavation to the exisiting cellar space would create new habitable space at basement level. The cost of these works would be approx £100K, the added value to the property £180K, yielding a devlopment profit of £80k

2- Demise of the roof space to the top floor flat would enable a loft conversion. This would cost approx £50K to build, add £150K to the value of the top floor flat, yielding a development profit of £100K

How do we value the cost of the freehold? Are there any other factors which come in to play? How can we minimise the cost of the freehold?

Many Thanks

Bea

[Gordon999]

You can download a publication of freehold enfranchisement from
www.lease-advice.org

[Bea]

Thanks Gordon, although that website does not provide much informaiton on how the development potential should be accounted for when valuing the freehold - can anyone advise?

Many thanks.

[sgclacy]

Development value which involeves having to make use of an existing lessees property is considered to be "hope vlaue" and is valued very lowly

Development which could take place without having to make use of an existing lessees property is valuable and will effect the value of the freehold

[Bea]

Many thanks sgclacy, this is good news as the potential does not exist without use of existing lessees properties.

When you say it is valued lowly, can you give any indication based on the above figures of how much the freehold would be worth?

Just to add to the above, the property is located in London.

I have tried to calculate this myself based on other posts in this forum, but without the table to calclate the years purchase I do not think it is possible.

[sgclacy]

The freehold value may well be of the order of:-

1) Capitilisation of the rent at 7.5% = £10,000

2) Value of the reversion of say £1,350,000 in say 102 years at 5% = 9,300

3) Hope value say £5k to £10k

Total value of the freehold £25 to £30k

Points 1 & 2 very confident to within £1500 either way

Point 3 you may pay that just to get rid of the problem, if you went to the LVT they may value it lower but then there are the costs

[Bea]

Thank you very very much sgclacy!

[Gordon999]

the Times ( December 17 2008 ) had a report headed " Landlords not entitled to hope value element " which was a decisionfrom the Cardogan v. Sporteilli Appeals.

You need to search for report ( speech by Lord Hoffman and others on 10 Dec 2008).

[sgclacy]

the Times ( December 17 2008 ) had a report headed " Landlords not entitled to hope value element " which was a decisionfrom the Cardogan v. Sporteilli Appeals.

You need to search for report ( speech by Lord Hoffman and others on 10 Dec 2008).

The hope value is to deal with the possibilty of lease extentsion from non participators. The hope value of a lessee coming forward in the future to seek a variation is different and does apply although the amount is very modest

[jeffrey]

Here's a link to the LZ 'Sportelli' thread: http://www.landlordzone.co.uk/forums...ight=sportelli

[Gazou]

The freehold value may well be of the order of:-

1) Capitilisation of the rent at 7.5% = £10,000

2) Value of the reversion of say £1,350,000 in say 102 years at 5% = 9,300

......

sgclacy - can you please explain: -

1.why these calculations do not take into account future date values (i.e. after escaltor rent increases or inflation)?

2. why the discount percentage for ground rent is 7.5% (I assume the 5% for the reversion value is per "Sportelli")

Many thanks in anticipation.