How much to buy out shared freeholder roofspace?

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    How much to buy out shared freeholder roofspace?

    Hi, I'd really appreciate advice from any property / legal professionals who can help.

    I have a joint freehold downstairs flat in a purpose-built Edwardian house. The upstairs is owned by another owner-occupier. We both have long leases on our respective flats and he now wants to develop the roof space which we co-own through the freehold.

    I don't want to block him developing the space but would like a fair payment for our share of it and we are struggling to arrive at what is fair.

    We got in a neutral surveyor (someone who I was recommended but have never met) who used what he said was a standard methodology of:

    uplift in value minus estimated costs divided by the two freeholders.

    This worked out at 140k - 60k = 80k / 2

    So he said he thought that a reasonable and fair payment to me would be 40k.

    My upstairs co-freeholder has offered me 9k. Whilst I'm not interested in blocking his development, I'd like to understand what a fair price is - other people I've spoken to seem to vary from around 15k up to 30-35k. He has said that this is not the case and that property developers and people he knows in the trade have told him 6k-9k is a fair price.

    My lawyer has told me there should be no negotiation at all.

    I'm not wedded to 40k and am happy to negotiate but I thought 40k would be the negotiation starting point and I was a little shocked when he proposed 9k.

    I've suggested 30k and asked him to look at other ways of financing buying us out. He has refused and said that this is not an asset for us but a liability and that the roof (suddenly!) needs some work doing to it as it is leaking.

    I'd just like some straightforward advice as to what is fair to be asking for.

    Many thanks

    #2
    Could you compromise on the understanding that both leases are amended so the top flat pays for all roof repairs now and in the future?

    Comment


      #3
      Yes. He says he is happy to do that - does that make 9k fair?

      Comment


        #4
        I guess it's a question of whether you are prepared to accept it. Make sure he pays for all the legal work before the building work, as you'll have no chance afterwards.

        Comment


          #5
          Undeveloped, and with you contributing to roof repairs the roof is pretty much a liability to you not an asset as your neighbour has asserted. You only have a 'hope' of any value being achievec.

          A decent price is whatever can be negotiated. If your neighbour is unwilling to go beyond 9k and full liability for repairs then you may as well take it. If you think you can push him further then try, but obviously at the risk of him abandonong the project.

          What anyone else, surveyor or otherwise thinks a fair price is may prove to be immaterial.

          Comment


            #6
            The methodology the surveyor used is the common way. Your lease should have a clause covering such things. The monetary figures maynot be right but the calculation is right.

            Freeholds are only assets when they are sold. They are liabilities during ownership.

            Look at it anotherway. For £9k your neighbour is buying a £71k asset (based on the OPs figures).

            IMO, if by converting the loft the neighbour is indeed increasing the value of their property by £140k then why should they pay so little for it?

            Whilst the roof is currently a liability your share for its repair would not be £31k. The choice is yours. They could still carryout the conversion and then sort out the paperwork when they come to sell. Although, this would mean you're going to have to own your flat for longer than them!
            There is always scope for misinterpretation.

            If my posts can be interpreted in two ways, one that makes you feel angry and one that doesn't, I meant the latter.

            Everyday is an opportunity to learn something new.

            Comment


              #7
              If you are after the surveyor recommended value or close to it, be prepared that upstairs will likely abandon his project and you could get nothing.

              A bird in hand is worth 2 in the bush. You have 9k plus a possible 9k reroof in the future available to you, so 18k(admittedly if you move you will not see the reroof) . The actual worth could be 40k but your chances of achieving that are nil.

              Something is only worth what someone else will pay for it. Unless you feel the extension will devalue your property I would push for a realistically achievable figure, but probably be happy with the 9k if your neighbour will not budge. Remember your neighbour will have to raise these funds.

              Get a good solicitor, costs to be paid by the neighbour.

              Comment


                #8
                uplift in value minus estimated costs divided by the two freeholders.

                This worked out at 140k - 60k = 80k / 2
                That equasion means that the leaseholder gains no benefit from the extension, whereas it is commonly considered fair that the leaseholder and the freeholder share equally in the uplift after costs are deducted.

                That would mean the freeholder would be seeking to share half of the uplift, as compensation for agreeing the sale.
                In the example above that would be half of 80K, which is 40K.
                Since there are joint freeholders then each would then receive 20K for the sale of the extra land conveyed to the leaseholder.

                I know that is the procedure followed when an area of farmland is sold to increase the size of a garden for an adjacent house.
                The price paid is half of the increase in value for the house plot with that additional garden added.

                It would be unreasonable for the farm-owner to ask for the full uplift as the selling price, because there is then no point in the prospective purchaseragreeing to that price.
                There is no benefit in owning extra garden land per se. It is the uplift in the value of the house-plot that is the only benefit.

                The figure of 40K mentioned by this surveyor makes no allowance at all for any increase in value to the leased property, which is why I would most certainly not agree that was the correct point to start negotiating from.
                A negotiated payment of between 9K and 20K with a further consideration being that all future cost of repairing the roof be included in the new lease, would be the starting point if it were me, or any other professional property developer.

                Comment

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