Help needed to estimate freehold value

Alanmelon

I've been toying with the idea of acquiring the freehold to my 100 year old terraced house for a while. The lease is very long (about 900 years remaining) and I only pay a peppercorn ground rent of £1 per year. I would estimate the value of the house to be around £175000.
I've had an informal chat with a solicitor and he recommended that because the value of the freehold is likely to be so low that it may prove beneficial to try to agree financial terms with the freeholder before undertaking expensive legal and surveying costs.
Before undertaking any negotiations it would be helpful to have and an approximate value or range of values in mind but trying to calculate your way around freehold valuation seems nightmarishly complex. Would anyone with experience of such a transaction or working knowledge of the system be able to suggest a realistic figure with which to approach the freeholder. My own non specific calculations place the value at less than £100... Is this far out?

HappyMJ

Alanmelon wrote: »

I've been toying with the idea of acquiring the freehold to my 100 year old terraced house for a while. The lease is very long (about 900 years remaining) and I only pay a peppercorn ground rent of £1 per year. I would estimate the value of the house to be around £175000.
I've had an informal chat with a solicitor and he recommended that because the value of the freehold is likely to be so low that it may prove beneficial to try to agree financial terms with the freeholder before undertaking expensive legal and surveying costs.
Before undertaking any negotiations it would be helpful to have and an approximate value or range of values in mind but trying to calculate your way around freehold valuation seems nightmarishly complex. Would anyone with experience of such a transaction or working knowledge of the system be able to suggest a realistic figure with which to approach the freeholder. My own non specific calculations place the value at less than £100... Is this far out?

Probably not far out but the cost including legal costs far outweighs just paying the £1 a year for the next 900 years.

You only need £20 in a TSB current account to earn £1 per year at 5% interest so in my opinion it's worth £20 but to pay that off you've got £1,000 in legal costs. So...not worth doing.

Alanmelon

Thanks for the reply. I appreciate that legal fees are likely to outweigh any real benefit in acquiring such a lease. That's why I've been debating it.
I'm just the sort of person who likes to tie up loose ends. I'd also like to avoid the snotty demands for ground rent which keep reminding me that any alterations would have to be agreed by the freeholder.

eddddy

Alanmelon wrote: »

Thanks for the reply. I appreciate that legal fees are likely to outweigh any real benefit in acquiring such a lease. That's why I've been debating it.
I'm just the sort of person who likes to tie up loose ends. I'd also like to avoid the snotty demands for ground rent which keep reminding me that any alterations would have to be agreed by the freeholder.

Yes - and they may try to charge you a few hundred quid to give their agreement.

And there may be other terms in the lease that you might want to be freed from.

Anyway, this firm have an online house freehold purchase calculator: http://www.m-js.co.uk/calculator


(But based on the letters you mention, I suspect the freeholder is keen to maximise their income from the properties - so it may be a tough negotiation.)

the_flying_pig

In pure financial terms it's worth next to nothing.

Ownership of this freehold entitles the owner to the following [assuming that the ground rent will never goes up & that the lease runs for exactly 900 yrs]:

in 2016, £1 of ground rent ;
in 2017, £1 of ground rent (worth more like say £97 or whatever in today's money);
in 2018, £1 of ground rent (worth less than £1 in 2017 etc)
...
...
etc.
in 2916, a final £1 of ground rent, plus also the entire value of the house. the thing is that 2916 is so impossibly far away that even the promise of a truly vast amount of money then, say the entire annual GDP of this country, £1.5t trillion, is today entirely, entirely worthless.

overall we're only talking a few quid really.


what is however relevant is the point that OP mentions about no longer needing freeholder agreement for stuff. harder to attach a monetary value to that?

davidmcn

eddddy wrote: »

And there may be other terms in the lease that you might want to be freed from.

...and which add to the value of the freehold

Alanmelon

So the way I see it, I can either try and circumvent the surveying fees by agreeing a value or cough up for a formal valuation which by law, the freeholder is obligated to sell for

the_flying_pig

Alanmelon wrote: »

So the way I see it, I can either try and circumvent the surveying fees by agreeing a value or cough up for a formal valuation which by law, the freeholder is obligated to sell for

I think you're [sort of] describing lease extension - a freeholder has to agree to extend a lease at a price determined by set formulae if a leaseholder serves notice on him through the statutory route etc.


But unless there are special circumstances that you're not mentioning. nobody who owns something has to sell it if he doesn't want to. If he wants to sell he'll often have to give leaseholders first refusal, that's it.

TrickyDicky101

You'll also have to pay yours and the freeholder's legal costs (not just valuation fees).

HappyMJ

Alanmelon wrote: »

Thanks for the reply. I appreciate that legal fees are likely to outweigh any real benefit in acquiring such a lease. That's why I've been debating it.
I'm just the sort of person who likes to tie up loose ends. I'd also like to avoid the snotty demands for ground rent which keep reminding me that any alterations would have to be agreed by the freeholder.

I really doubt the freeholder ever comes to inspect your house so I wouldn't bother seeking permission and just get on with whatever it is you want to do. In 900 years I doubt the property would even be standing.

eddddy

the_flying_pig wrote: »

I think you're [sort of] describing lease extension - a freeholder has to agree to extend a lease at a price determined by set formulae if a leaseholder serves notice on him through the statutory route etc.


But unless there are special circumstances that you're not mentioning. nobody who owns something has to sell it if he doesn't want to. If he wants to sell he'll often have to give leaseholders first refusal, that's it.

No...

The Leasehold Reform Act 1967 (the 1967 Act) gives leasehold tenants of houses the right to buy the freehold. The right to compulsorily purchase the freehold (and any intermediate leasehold interest) is termed enfranchisement.

See: http://www.lease-advice.org/advice-guide/houses-qualification-and-valuation/