selling a flat to an upstairs neighbour

rogermoss

Does anyone have experience of this? I.e. selling a flat not on the open market, but to an upstairs neighbour who is a fellow freeholder in the same property where I have a share of the freehold. This will increase their portion of the property from 50% to 75%, and may therefore increase the value of their stake by more than the market value of the flat -- in which case I should presumably ask a high price. But it will save me hassle and agents' fees -- so they're going to feel entitled to ask me to lower the price. Any thoughts welcome.

eddddy

rogermoss wrote: »

This will increase their portion of the property from 50% to 75%, and may therefore increase the value of their stake by more than the market value of the flat

I can't see any logic at all in that suggestion.

• What form does this extra increase in value take? (Unless you mean it gives them a 'majority' vote in decision making.)
• If you sold via an EA at "market value" the upstairs neighbour could buy it anyway - at the normal "market value"

But there's no problem with selling to the upstairs neighbour - but as with any sale, you have to agree a price. If you can agree a price that you're both happy with, just go ahead.

Tom99

How come they already own 50% and buying 1 extra flat takes it to 75%? Do they already own 2 of 4 flats?

bowlhead99

Commercially there is value in having something that gets you greater control of a management company shareholding (75% vs 50%) and there must be *some* commercial value in owning all-but-one units in a building rather than just one or two units in a building.

For example, owning one or two, you are just another number in the big machine. Owning all-but-one, you're one step away from owning the entire property and having complete control of the site. You could knock flats together, raze it to the ground and do something else, etc etc.

For a purchaser who owns nearly all of it and then buying the last flat, the seller if that last flat definitely has scope to charge a "control premium" on the sale because that purchase would give the purchaser something over and above what it would give the average unconnected man on the street. That purchaser might discover he has deeper pockets when he is asked to dig deep. So much so that he might even try to hide the fact that it's him that's buying it, so as not to be held over a barrel on the price.

When you are not at that 'last flat standing' situation you are not really selling them so much control because they have other pieces of the puzzle to put in place before they get their objective of overall ownership and control. But still, if he is 'stake building' there is value in him getting some of that stake via you - eventually he hopes the whole to be worth more than the sum of its parts. Therefore you could try to ask more for your part than what it might fetch from a sale to an unconnected buyer. You just don't have quite the same bargaining power as if you knew you were the last to go.

Thinking laterally of course it may be that he has already made a separate offer to the other person in the building for a premium subject to him being able to get yours agreed too. Stranger things have happened. Then you could be underselling yours without realising it.

If you sold via an EA at "market value" the upstairs neighbour could buy it anyway - at the normal "market value

You are free to sell to whomever you like. If you want to charge him a premium he can't just say "fine I'll go to your estate agent then and put a normal offer in", because ultimately it would be you signing the sales contract either way. A sale via your EA is not automatically "out of your hands". You decide which offer you want, and what you would accept from what sort of buyer.

eddddy

bowlhead99 wrote: »

Owning all-but-one, you're one step away from owning the entire property and having complete control of the site. You could knock flats together, raze it to the ground and do something else, etc etc.

If there's more value in owning the whole property, why did the freeholder split it into pieces (flats), and sell each flat lease individually.

Why didn't the freeholder just sell the whole property as one unit, if it's more valuable that way?

G_M

Put it on the open market with an estate agent.

That way, the flat-owner ustairs will probably still buy it (lease and share of freehld and all) at a similar price, but you'll have the satisfaction of keeping an estate agent in bubbly over christmas.

This is a pointless thread. Just agree a price with upstairs in the normal way.