Help calculating value of freehold on flats

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    Help calculating value of freehold on flats

    If someone with the appropriate valuation expertise/tables could help me Id be very grateful.

    I am not a leaseholder but I'm considering buying the freehold of a block of 24 flats. All flats are on long leases with 295 out of 300 years left to run. Ground rent is £100 per flat per annum (I havent read the lease yet but I dont remember if there is provision for increase) Leases were sold 5 years ago for about £160k each ( but 2 recently changed hands for £60k !!)

    I know its not as simple as (24 * 100) / 7% yield and Ive tried to locate the appropriate forumlae to calculate it myself but so far with no luck.

    As its very early days I dont want to pay for a prosfessional valuation yet.


    BTW - I have looked at the freehold calculator refered to in other threads but am embarrassed to say I didnt understand how to use it for a block rather than a single property.

    Thanks
    Steve

    #2
    Ensure that V complies with s.5 of LTA 1987 (giving leaseholders the statutory Right of First Refusal).
    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
      Originally posted by sting2 View Post
      If someone with the appropriate valuation expertise/tables could help me Id be very grateful.

      I am not a leaseholder but I'm considering buying the freehold of a block of 24 flats. All flats are on long leases with 295 out of 300 years left to run. Ground rent is £100 per flat per annum (I havent read the lease yet but I dont remember if there is provision for increase) Leases were sold 5 years ago for about £160k each ( but 2 recently changed hands for £60k !!)

      I know its not as simple as (24 * 100) / 7% yield and Ive tried to locate the appropriate forumlae to calculate it myself but so far with no luck.

      As its very early days I dont want to pay for a prosfessional valuation yet.


      BTW - I have looked at the freehold calculator refered to in other threads but am embarrassed to say I didnt understand how to use it for a block rather than a single property.

      Thanks
      Steve
      As teh lease length is around 300 years remaining Its value will be based solely on the ground rent income (unless there is future development potential)

      You must get hold of teh details of the ground rent increases inorder for me to give you an indication of its value

      Comment


        #4
        Jeffrey
        Current freeholder is the original developer and is in adminstration so getting them to offer first refusal to leaseholders may be tricky however thanks for the reminder (will certainly take professional advice as to how to make sure that particular box is ticked when the time comes)

        SGCLACY
        Have just turned up the following
        Rent (x 24 apartments)
        £100 pa 1/6/06 - 30/05/55
        £150 pa 1/6/55 - 30/5/105
        £200 pa 1/6/105 - 30/5/155
        £250 pa 1/6/155 - 30/5/205
        £300 pa 1/6/205 - 30/5/255
        £350 pa 1/6/255 - 30/5/305

        Hope you can help
        rgds
        Steve

        Comment


          #5
          value of long dated ground rents

          I reckon its a reasonable purchase at no more than £30-35000..

          Comment


            #6
            I would agree with quarterday

            Comment


              #7
              Thanks all - that tallys with what I thought
              Steve

              Comment


                #8
                A little trick

                Tonight, someone told me of a little trick some developers use to avoid having to offer the freehold to the lessees. They set up a company to hold the leases, then sell the company to a freehold management company.

                Would you be able to buy the developer?
                To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

                Comment


                  #9
                  Originally posted by jamesknight0 View Post
                  Tonight, someone told me of a little trick some developers use to avoid having to offer the freehold to the lessees. They set up a company to hold the leases, then sell the company to a freehold management company.

                  Would you be able to buy the developer?
                  Sale of the share capital of a company that owns a freehold ground rent does not require the issuance of a section 5 notice

                  sometimes a developer sells the freehold before 50% of the flats are sold on a conditional contract. The fact the developer has entered into the contract would need to be disclosed to the purcashers of the flats before the remaing flat owners exchange contracts

                  Comment


                    #10
                    Originally posted by jamesknight0 View Post
                    They set up a company to hold the leases, then sell the company to a freehold management company.
                    Do you mean "to hold:
                    a. the leasehold interests; or
                    b. the freehold reversion"?
                    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


                      #11
                      aha

                      Interestingly, the developer DID sell half the leases to a "lettings" company that it set up but I assumed it was rather dodgey way of raising some capital as they mortgaged all of the flats that they sold to this company.

                      Comment


                        #12
                        So Co1 granted leases (for 50% of the flats) to Co2. That makes no diffenrence to everyone else's leases.

                        What does this mean: they mortgaged all of the flats that they sold to this company? Co1 cannot mortgage the leaseholds granted to Co2.
                        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


                          #13
                          Jeffrey
                          Co1 (developer) sold leases for 11 out of the 24 appts to Co2 (Lettings co). Co 2 bought the leases using high LTV mortgages with a dubious market valuation. Both Co1 & Co2 are owned by the same Holding Co.

                          As you rightly point out its perhaps irrelevant wrt avoiding leaseholder enfranchisement but interesting to see one live example of how some developers fueled the embers of the current property financing crisis.

                          Comment


                            #14
                            good luck to them

                            why shouldn't the developer transfer his stock into a different legal entity?

                            Comment


                              #15
                              Originally posted by quarterday View Post
                              why shouldn't the developer transfer his stock into a different legal entity?
                              No reason at all- but taking such leases may expose Co2 to a lot of SDLT (and HMLR fees too).
                              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

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