Valuing freehold when lease 989 years but development potential for loft conversion

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    Valuing freehold when lease 989 years but development potential for loft conversion

    I own a first floor flat in a block of 2. Each has a 999 year lease from 2004, at a ground rent of £1. My flat is valued at £220K.

    The freeholder owns the ground floor lease and is offering the lease for sale at £245K with an apparent option to buy the freehold. I am told I have a right of first refusal should the purchaser want the freehold, but that otherwise I do not.

    Meantime, I have obtained planning permission to convert the roof space above my flat into another bedroom, but I have to obtain the landlord's permission and he is asking me to pay £6K for it. I am wondering about making an offer for the freehold - which I can't imagine will be worth much to the incoming purchaser given the long lease etc. But how do I calculate what would be reasonable to offer? If the landlord did not know of my wish to convert the loft the marriage value calculation would be very low, but he does know. Can he demand any price he likes?

    #2
    Originally posted by AMPAINE View Post
    The freeholder owns the ground floor lease and is offering the lease for sale at £245K
    what are the terms of that other lease? This will have an impact on the residual value of the freehold.

    Comment


      #3
      Originally posted by AMPAINE View Post

      The freeholder owns the ground floor lease and is offering the lease for sale at £245K with an apparent option to buy the freehold. I am told I have a right of first refusal should the purchaser want the freehold, but that otherwise I do not. ?
      Actually you dont as the freeholder owns the freehold and that lease- there is no ability to meet the qualification for right to first refusal.

      Originally posted by AMPAINE View Post
      Meantime, I have obtained planning permission to convert the roof space above my flat into another bedroom, but I have to obtain the landlord's permission and he is asking me to pay £6K for it. I am wondering about making an offer for the freehold - which I can't imagine will be worth much to the incoming purchaser given the long lease etc. But how do I calculate what would be reasonable to offer? If the landlord did not know of my wish to convert the loft the marriage value calculation would be very low, but he does know. Can he demand any price he likes?
      It depends on what rights or ownership you have of that area to convert it or alter the roof, or if the other flat has rights over that area, as to whether what you propose is possible. If say the lease and roof is inside your demise, or you can assert that it is, as is often the case in these one up one downs, there is no value at all.

      As explained in another thread that you do intend to buy the freehold and convert the loft space, given the terms of the lease and that there is no right to first refusal the valuer will advise the freeholder to increase the price,, if applicable ie you have to pay to acquire the areas, to reflect the above and negotiate as hard as they can for the highest price. You in turn know that the price that he will get is likely lower than what you might offer because of the value of the roof area to you, and therefore press for a lower figure knowing that it is still more than they will get elsewhere.
      Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

      Comment


        #4
        Thank you so much for such a helpful - and speedy - reply. what a marvellous website!
        Re the question of first refusal: both flats have 999 leases, the freeholder owns one and I own the other. Maintenance costs and insurance are shared 50:50. He does not live in his flat but lets it under AS tenancies. The estate agent acting for the sale of his flat, and my local solicitor, have advised me that if he offers the freehold (which is not currently split between flats) for sale, either with or without the sale of the lease of his flat, as the owner of a long lease on the other flat in the block I have the right to be sent a letter offering me a share of this freehold. Are you saying that isn't the case, or are we talking about 2 different things?
        Re the second bit, I own the roof space and the ceiling/floor between my flat and that roof space ie they are explicitly within my existing demise. However my lease says that I need the landlord's permission to make any structural alterations, and the loft conversion requires the creation of a dormer & staircase, and 3 other velux windows. It is this permission for which he is requesting £6K. SO what I need to decide is a) whether to focus on the permission only - if he insists on £6K that's maybe a quarter of my budget & I'll have to not do it so he'll get nothing. Or should I go for the freehold on the basis that it is clearly worth far less than £6K to anyone but me, and if I had it I could grant myself permission? I guess it would need to be the whole freehold otherwise I might end up still needing permission from the owner of the other half share, mightn't I?

        Comment


          #5
          The existing lease of the GF flat, which the freeholder owns, is the same as mine ie a 999 year lease from 2004, with GR of £1. However the estate agent's particulars for that flat claim the lease is 125 years. I was assuming that this was an error, but have just realised it is possible he is keeping the 999 year lease and selling a 125 year one, perhaps to retain some potential value in the freehold? sounds unlikely...

          Comment


            #6
            Originally posted by AMPAINE View Post
            , and my local solicitor, have advised me that if he offers the freehold (which is not currently split between flats) for sale, either with or without the sale of the lease of his flat, as the owner of a long lease on the other flat in the block I have the right to be sent a letter offering me a share of this freehold. Are you saying that isn't the case, or are we talking about 2 different things??
            First there is no such thing as share of freehold. It is the freehold, period.

            Second both EA and S are wrong. Even if there are two flats on long leases which prima facie meet the criteria for the freehold to be offered to the leaseholders.

            However in order to exercise the right to first refusal, in this case, both flat owner must agree to exercise the right,& as the other leaseholder who also owns the freehold, is hardly going to agree to sell to himself, is he That means that the exercise of that right is not possible in this case.

            if he serves notice you say yes he with his leaseholder's hat on, says no, and you cannot exercise the right. Two months later he is where he wants to be free to sell it as he sees fit at any price.

            OK if I accept that you are free to convert the attic space you seem to need to need consent for the alterations and in that case fees, not a premium or price, are the sole amount due.


            Now the question not addressed is that the roof and timbers or structure of the roof might be outside your demise so you cannot alter that which is not yours. In that case he is free to ask for a price or premium.
            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

            Comment

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