Buying the FreeHold of the property.

Mass_3

Dear all.
I am new to this forum and I will appreciate any helpful advice I get here.

I have Lease Hold property which expires on 2047 (37 years remanning). I was thinking buying the Free Hold of the property but I cannot figure on which price the FreeHolder is willing to sell the FreeHold. I know it is negotiable but I found it very hard to deal with FreeHolder so I was thinking to sent the matter to the Lease Value Tribunal (LVT).

I know the main 3 factors which calculates the FreeHold price are as following:

1: Current Value of the Property - ( Which is £1.4mil )
2: Lease length remanning 2047 - (37 years remanning)
3: Annual Ground Rent £55

If found it this written report from John D Wood & Co surveyors but I could not understand how the calculation was taken place from £3million property to pay £ 1.185.000 at the rate 4.75%. Check this written report below.

Reversionary Interest (R)
At the end of the lease the Freeholder has the right to regain possession of the property. This is known as the reversionary interest because the property reverts to the Freeholder.
To calculate the value of the reversionary interest, the estimated long lease/freehold unimproved value (UFV) of the property is discounted over the length of the lease to a present value by using a deferment rate (also known as a discount rate or reversionary
yield). At the end of the current unexpired term the Freeholder could sell the flat/house on a new lease and this “interest” has a current value. As an example, if a property is worth £3 million freehold at the end of a 20 year lease you would now have to invest a lump sum of around £1,185,000 at a rate of 4.75% per annum for 20 years to achieve the same sum. With a flat, the Freeholder still retains a reversionary interest at the end of the extension therefore the calculation is to establish the diminution in their reversionary interest. Please see table opposite which shows key Tribunal decisions on deferment rates and their impact upon the cost of the premium.

Please does any one know how to calculate what price it will cost me to buying the FreeHold of the house?

I will appreciate any help and advice been given.


thanks
Mass

Richard_Webster

You are going to be better raising this on Landlordzone.co.uk's forums as there are more technical people there to answer this kind of thing.

Mass_3

Richard_Webster wrote: »

You are going to be better raising this on Landlordzone.co.uk's forums as there are more technical people there to answer this kind of thing.

Thanks Richard, I'll check it out now.