Valuation while renting quant property from public body

cryvate

Section62 said:

cryvate said:

What is happening with the other half, is anyone living in it? Are you planning to buy the whole building, or only the half you live in?

cryvate said:

This is a bit of an alarm bell to me. If the use is/was something 'public', involves water, and established by Act of Parliament, then I have things like water works, sewage works, reservoirs, canals etc in mind.  Any of which (plus a lot more) could also pose risks of having contaminated land.

It is understandable you might not want to give more details here that could identify the location, but bear in mind the valuation and mortgageability will depend hugely on the nature of the (former) land use.

Other than that, you need to get a (paid for) professional valuation from someone with extensive experience valuing 'unusual' properties.  You may (with the current owners) need to get three valuations and compare them.

Also bear in mind that public* bodies have a legal duty to obtain good value for any assets they dispose of, and shouldn't sell property at less than the value which could be obtained on the open market. Before spending too much investigating this idea, it would be worthwhile considering whether those who have indicated an interest in selling actually have the authority to make that decision on behalf of the body, of if the idea will be rejected as soon as the 'real' decision makers are asked.  (*this includes quasi-public bodies)

Currently the intend is to buy our half, but we are considering adding the, small, office building and the neighbours half when we can, though I do know that it would be difficult in terms of mortgages, planning permission etc. Our neighbours are also renting and we are unsure whether they would be in a position to buy.

The land we would purchase has never itself been used for anything beyond "being a house (for the lockkeeper)" from what I understand, at least in recent times and it surrounded by fields used for agriculture on the both side of the river (the public body is a navigation authority).

I have now contacted a surveyor and they are going to get back to me with options.

I understand your concern regarding public bodies, and it is one I was worried about but it I know they intended to sell the properties in their next budget period (5 years) anyway so it seems this is not a new idea to them. I am happy to market rate for the property, though avoiding open market would be nice.

cryvate

I have spoken to a surveyor and gotten a quote for a Level 3 Survey and a valuation, though they think it will be tricky. I am leaving it on hold for now until I hear back from the public body after their meeting to discuss this matter.

I have a further question though: we are considering buying the office that borders our garden (and even has an exit into it even). It seems likely now we will want to buy this too at near the same time. Now... is the question is:
- do we do this as one transaction (I would prefer to)
- the current use is "offices", I guess we would have to change this to "dwelling"? Basically it would be an annex I guess? with the more day-to-day use likely to be as a personal office for us and maybe a guest house (this would require some internal work, but it does have (plumbing for) a toilet already): I have family abroad who might visit for a while from time to time?

Would it make sense for them to still be two different properties (as they are at the moment) or should they merge? I guess council tax et cetera would be confusing if we do not merge them, on the other hand, might want to sell them separately (though I think it is a nice package deal, also I am not planning to move anytime soon, but we are in our twenties so it is not unlikely we will have to/want to for some reason).

How would mortgaging something like this? Should I be talking to mortgage broker to discuss what consequences this might have (I guess it might reduce our options/increase interest rates)? Would we get permission from the planning authority to do this before doing the deal? That's what they seems to be what they did last time they changed its use.

Apologies for my rambling, it's all quite complicated (though maybe I am making it more complicated than it needs to be) and I am finding it hard to find good info online.

SDLT_Geek

The story continues here: 

https://forums.moneysavingexpert.com/discussion/6297716/buying-2-properties-one-plot-mortgage-sdlt-planning#latest

cryvate

To update this thread:

• To some of the doubters of a public body selling without going to open market. I understand the general committee is recommending sale to the board, and that the houses (both sides) will be offered to sitting tenants first before going to open market.
  
• I (white) lied to estate agents and got some valuations, though I am unsure how inaccurate they are, however the public body has gotten valuations (without people visiting the property: I haven't seen them), so I am guessing they will be similar.
  

As you can see from the other threads I have posted, we are considering buying an outbuilding/office on the same plot of land as well. Will update with the shenanigans that I am sure the surveyor will throw up!

Downside is that our neighbours might get effed over, hoping to have a meeting with them when we have the valuations to see whether they can afford their half (they are amazing and have been here much longer). I am very excited and fingers crossed the valuation is realistic and the surveyor's report won't be *too* bad (you all have made me less worried: a lot of the problems are common).

dimbo61

Sorry not read all the other posts but it's currently a Rental property with a Poor EPC rating of ??? If it's F or G they should not be renting it !
Land has a value and so will the property and out buildings/office.
Have you got the money to bring up to date ?
Will you get a good discount under Right To Buy ?
What do the owners want for the property and land ?

cryvate

dimbo61 said:

Sorry not read all the other posts but it's currently a Rental property with a Poor EPC rating of ??? If it's F or G they should not be renting it !
Land has a value and so will the property and out buildings/office.
Have you got the money to bring up to date ?
Will you get a good discount under Right To Buy ?
What do the owners want for the property and land ?

It has got EPC rating of E (improvable to D). Interesting though, did not know one could not rent F or G, resource here.

I am unsure how much value the land has as it is within a conservancy area and so anything outside of Permitted Development will be a hard sell and the valuations I got were aware of the land (because they visited).

What do you mean by "bring up to date"?

Insofar as I can tell, we do not have "Right To Buy" in a legal sense, because it's not owned or operated by the council (it's not council housing, a normal AST with the LL being a public body). What I have been thinking, though they are saying they will put it on the open market if we refuse, they will struggle to sell the property with us in it (as the rental income does not weigh up against the value).

From informal discussions, it seems like they got their valuation from a similar source as I did and the office is not that valuable either going of its rent, occupancy (frequently unrented) and lack of potential (small and cannot be expanded). I will know more in weeks to come.

Section62

cryvate said:

To some of the doubters of a public body selling without going to open market. I understand the general committee is recommending sale to the board, and that the houses (both sides) will be offered to sitting tenants first before going to open market.

If that comment is in response to my post (nobody else mentioned 'open market') then you might want to re-read what I said.

It wasn't that the public body has to go to open market - only that they have a legal duty to obtain good value for any assets they dispose of, and shouldn't sell property at less than the value which could be obtained on the open market.

Which means if you aren't willing to pay the open market value then they cannot sell it to you unless they have an exceptional justification.

Which is borne out by -

cryvate said:

What I have been thinking, though they are saying they will put it on the open market if we refuse, they will struggle to sell the property with us in it (as the rental income does not weigh up against the value).

As you only have an AST they have the option of giving you notice (evicting you if necessary) and then selling the property on the open market with vacant possession.

The organisation's legal officer/monitoring officer would need to take a view whether selling the property to you at sub-market value offers better overall value (i.e. exceptional justification) compared to the costs of having you evicted and then selling on the open market.

The balance of that equation will also depend on how quickly they need to sell - they cannot rush to sell just because it would be convenient for them (and you) to do so, they would need a rational reason for urgency vs taking their time to get rid of you (as a tenant) via the legal process.

cryvate

Section62 said:

cryvate said:

To some of the doubters of a public body selling without going to open market. I understand the general committee is recommending sale to the board, and that the houses (both sides) will be offered to sitting tenants first before going to open market.

If that comment is in response to my post (nobody else mentioned 'open market') then you might want to re-read what I said.

It wasn't that the public body has to go to open market - only that they have a legal duty to obtain good value for any assets they dispose of, and shouldn't sell property at less than the value which could be obtained on the open market.

Which means if you aren't willing to pay the open market value then they cannot sell it to you unless they have an exceptional justification.

Which is borne out by -

cryvate said:

What I have been thinking, though they are saying they will put it on the open market if we refuse, they will struggle to sell the property with us in it (as the rental income does not weigh up against the value).

As you only have an AST they have the option of giving you notice (evicting you if necessary) and then selling the property on the open market with vacant possession.

The organisation's legal officer/monitoring officer would need to take a view whether selling the property to you at sub-market value offers better overall value (i.e. exceptional justification) compared to the costs of having you evicted and then selling on the open market.

The balance of that equation will also depend on how quickly they need to sell - they cannot rush to sell just because it would be convenient for them (and you) to do so, they would need a rational reason for urgency vs taking their time to get rid of you (as a tenant) via the legal process.

Apologies for phrasing it that way, that was unnecessary and you did make a very valid point, that the owner/public body seems to be executing faithfully, in fact, it has been going smoother than I anticipated. You were "wrong" in the sense that the person I spoke to, though not having the "direct" authority, had a good idea of how this could come about and how the process would work, and had informal agreement from others on the relevant board/committees that this is a good idea, and this has borne fruit so far.

I think you are right: I do not think I can knock e.g. 20% of the price saying "what else are you going to do".

What do you think about their position though, I would be interested:
- I think the public body is relatively cash poor with little way of raising revenue (they are trying to increase licence fees at the moment)
- Their previous sell of something similar took years and had to take a discount (from ~1,000k to ~625k I think)
- The rent they are getting from the properties (1250 + ~1000) from the properties seems poor relative to the valuation (~425k each) and there is quite a lot of maintenance too

Of course, the latter is a negative for me as well, but it seems to me, that the current situation is leaving the public body poorer every month (especially after agency cuts on the rents as well, they are "fully managed" by a high street broker).

Do you think the public body will do a "take it or leave it" offer? Do you think they will increase their offer relative to the valuation as we are eager or simply stick to them?

cryvate

One advantage is that an estate agent (fee) will be avoided.

Section62

cryvate said:

You were "wrong" in the sense that the person I spoke to, though not having the "direct" authority, had a good idea of how this could come about and how the process would work, and had informal agreement from others on the relevant board/committees that this is a good idea, and this has borne fruit so far.

Again, I think you've misunderstood what I actually said, which was -

"Before spending too much investigating this idea, it would be worthwhile considering whether those who have indicated an interest in selling actually have the authority to make that decision on behalf of the body..."

In other words, there was a risk of spending a considerable sum on professional advice, only to find out there was no official plan to sell the property.  I - and members of the forum - have no idea whether or not the person you were talking to was someone who knew what the situation was, hence my advice to you (being the person with more information) to consider the veracity of what you were being told by them.  That isn't a "right" or "wrong" thing to do... just an important thing to consider before spending a lot of your own money.

cryvate said:

What do you think about their position though, I would be interested:
- I think the public body is relatively cash poor with little way of raising revenue (they are trying to increase licence fees at the moment)
- Their previous sell of something similar took years and had to take a discount (from ~1,000k to ~625k I think)
- The rent they are getting from the properties (1250 + ~1000) from the properties seems poor relative to the valuation (~425k each) and there is quite a lot of maintenance too

If it is the organisation I think it is, £425k isn't a significant amount in comparison to its asset-base.

Public bodies have to account separately for income and expenditure in terms of 'capital' and 'revenue'. There are rules governing the sale of capital assets (e.g. these cottages) in order to cover revenue costs - therefore selling property isn't necessarily the money-making opportunity you perceive it to be.

On your third point, in assessing the relationship between income on these properties and their valuation, you need to bear in mind the organisation didn't have to pay that money to acquire the property - they effectively got them for 'free'.  The role of the organisation extends beyond maximising revenue receipts on the assets it is guardian for - there are also considerations relating to the long-term sustainability of the organisation and preservation and protection of heritage features.  The organisation (if it is who I think it is) has also experienced some controversy relating to previous decisions - so will probably have some regard to how the sale of these properties would look in 'PR' terms.

Therefore it is really difficult to predict their decision making process.

cryvate said:

Of course, the latter is a negative for me as well, but it seems to me, that the current situation is leaving the public body poorer every month (especially after agency cuts on the rents as well, they are "fully managed" by a high street broker).

I don't think they would see this as a significant concern. The 'loss' they might be making on these properties is trivial in comparison to the costs involved in maintaining their total asset-base.  Any income from rentals might be viewed as a bonus.

cryvate said:

Do you think the public body will do a "take it or leave it" offer? Do you think they will increase their offer relative to the valuation as we are eager or simply stick to them?

I think they will follow their policies and legislation on disposal of assets - there will be auditors whose job it is to ensure this has been done. However, if they do want to sell, you should have a reasonable expectation of agreeing a 'fair' sale price.

cryvate said:

One advantage is that an estate agent (fee) will be avoided.

They could (and possibly would) avoid that by marketing the property directly - for example by placing adverts in suitable publications or online.  There is no obligation to pay an estate agent to sell your property.