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    • Ekko
    • By Ekko 17th Jun 17, 11:29 AM
    • 6Posts
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    Ekko
    Flying freehold and property value
    • #1
    • 17th Jun 17, 11:29 AM
    Flying freehold and property value 17th Jun 17 at 11:29 AM
    Hi

    I have a question about the effect of flying freehold on property value.



    Suppose there is a 5 bedroom 3-story house with a cellar (cellar being the same

    floor area as the ground floor of the house, with bare walls and not damp proofed).
    And suppose the market value of this house is £600,000.



    Suppose now that the cellar is converted to a legally seperate dwelling (with its
    own front door access). Given the loss of the cellar space, and the resultant status of
    flying freehold, approximately what would the likely market value of the (3-story) house
    above the
    cellar now be?
    Last edited by Ekko; 17-06-2017 at 11:37 AM. Reason: accuracy
Page 1
    • Doozergirl
    • By Doozergirl 17th Jun 17, 11:40 AM
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    Doozergirl
    • #2
    • 17th Jun 17, 11:40 AM
    • #2
    • 17th Jun 17, 11:40 AM
    Why wouldn't/couldn't the owner of the house create a lease?

    It's only a flying freehold if the properties are in separate hands.
    Everything that is supposed to be in heaven is already here on earth.
    • eddddy
    • By eddddy 17th Jun 17, 12:07 PM
    • 4,937 Posts
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    eddddy
    • #3
    • 17th Jun 17, 12:07 PM
    • #3
    • 17th Jun 17, 12:07 PM
    As Doozergirl says, the freehold owner of the house would just sell the basement flat on a long lease.

    Or the the freehold owner of the house could sell the basement flat on a long lease, and sell the 3 storey house bit on another long lease. (That might make it easier for the buyer to get a mortgage.)

    No need for a flying freehold.

    If you're planning to buy this property (or own it) with a mortgage, I'm not sure what the lender's position would be about sub-dividing the property. They might refuse consent.

    You'd need to ask local EAs (or do your own research) about local property values - as well as researching likelihood of getting planning consent, costs of sub-division etc.
    • Ekko
    • By Ekko 17th Jun 17, 12:38 PM
    • 6 Posts
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    Ekko
    • #4
    • 17th Jun 17, 12:38 PM
    • #4
    • 17th Jun 17, 12:38 PM
    Hi -- thanks very much for your replies. This is a down-sizing idea that I'm researching.
    The idea would be to move into the converted cellar and then sell the house above.
    I'm just trying to get some idea of the likely approximate value of the house above given
    the current market value of the entire house is around £600,000. Doubtless my best bet
    is to contact a local estate agent about this.

    The flying freehold vs lease is not something I've looked into (in my ignorance, I was
    assuming that it would be the former). Naturally, other things being equal, I would choose
    the option that would get me a higher sale price.
    • G_M
    • By G_M 17th Jun 17, 12:53 PM
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    G_M
    • #5
    • 17th Jun 17, 12:53 PM
    • #5
    • 17th Jun 17, 12:53 PM
    As explained, it's no different to any building with two homes one on top of the other - ie two flats.

    One person owns the freehold of the building (the land and structural walls etc)

    One person (who may be but does not have to be the same person) owns a lease (say 999 years) for the basement flat.

    One person (again same or different) owns a lease for the remainder of the house.

    Each of these 3 things (freehold + 2 leases) has a value and can be sold on, either in combination or separately.

    I'm no RICS Valuer, but a £600,000 house with a virtually unusable celler will not be worth much more than a £600,000 house no celler. On the other hand, location could be important. In central London, a damp, dark hole in the ground might well have real value. A Hobbit in particulaer would pay through the nose for it........!

    Ask 2 or 3 agents.
    Last edited by G_M; 17-06-2017 at 12:56 PM.
    • Ekko
    • By Ekko 17th Jun 17, 1:23 PM
    • 6 Posts
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    Ekko
    • #6
    • 17th Jun 17, 1:23 PM
    • #6
    • 17th Jun 17, 1:23 PM
    That's very interesting. Suppose then that I set up the coverted cellar as a leasehold property for myself. I take it then that I would have the option of selling the above house as a leasehold property to a buyer, either with or without the freehold of the land, cellar and house above. But would the freehold be considered of extra value, or could it be considered a liability?
    • lincroft1710
    • By lincroft1710 17th Jun 17, 2:26 PM
    • 9,481 Posts
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    lincroft1710
    • #7
    • 17th Jun 17, 2:26 PM
    • #7
    • 17th Jun 17, 2:26 PM
    By converting the cellar into a separate basement flat, you will be making the house a less attractive proposition for a potential buyer. It would be far easier to sell the house as it is and buy something else.
    • G_M
    • By G_M 17th Jun 17, 3:16 PM
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    G_M
    • #8
    • 17th Jun 17, 3:16 PM
    • #8
    • 17th Jun 17, 3:16 PM
    But would the freehold be considered of extra value, or could it be considered a liability?
    Originally posted by Ekko
    It is both.

    * It has a value and can be sold seperately.
    * when the house lease ends (in, say, 99 years) the house reverts to the freeholder's ownership
    * when the house lease reduces to, say 65 years remaining, few mortgage lenders will lend to a buyer, so the lease owner often decides to extend the lease iebuy extra years from the freeholder. This is a value.
    * the lease may stipulate that the leaseholder must not only pay annual maintenance fees (eg for roof maintenance), but also the freeholder's reasonable fees for mamanging the building.

    On the downside the freeholder has obligations

    * to insure the building each year (though at the leaseholder's cost)
    * to arrange maintenance/repairs ((though at the leaseholder's cost)
    etc
    • Ekko
    • By Ekko 17th Jun 17, 6:35 PM
    • 6 Posts
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    Ekko
    • #9
    • 17th Jun 17, 6:35 PM
    • #9
    • 17th Jun 17, 6:35 PM
    Thanks GM and everyone else -- I will cogitate!
    • Ekko
    • By Ekko 17th Jun 17, 7:02 PM
    • 6 Posts
    • 0 Thanks
    Ekko
    GM -- thinking about what you said, suppose that, after conversion of the cellar, I
    get the legal process done for making the cellar a leasehold property (with a nice long lease)
    for me to live in. If I were to then sell the upper house and the freehold of the entire property
    to a buyer, does the fact that the buyer owns the land and the entire superstructure mean
    that the freehold they own is not a flying freehold, but just a regular freehold (albeit one that
    contains a leased out component)?
    Last edited by Ekko; 17-06-2017 at 7:18 PM. Reason: accuracy
    • G_M
    • By G_M 17th Jun 17, 9:50 PM
    • 40,553 Posts
    • 46,397 Thanks
    G_M
    GM -- thinking about what you said, suppose that, after conversion of the cellar, I
    get the legal process done for making the cellar a leasehold property (with a nice long lease)
    for me to live in. If I were to then sell the upper house and the freehold of the entire property
    to a buyer, does the fact that the buyer owns the land and the entire superstructure mean
    that the freehold they own is not a flying freehold, but just a regular freehold (albeit one that
    contains a leased out component)?
    Originally posted by Ekko
    See post 5 above.

    A FF is where 2 freeholds overlap.

    Suppose your celler extended beyond the boundary of your property underneath the neighbour's (freehold) house. Your neighbour's kitchen might be above your celler. That would be a FF.

    https://en.wikipedia.org/wiki/Flying_freehold
    Last edited by G_M; 17-06-2017 at 9:54 PM.
    • Ekko
    • By Ekko 18th Jun 17, 6:43 AM
    • 6 Posts
    • 0 Thanks
    Ekko
    ..... Thanks GM
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