Freehold asking price unaffordable. Therefore, should I ask for the cost of extending the lease?

topoftherock

I’m not sure if this is worth anything, but I’ve actually found the freeholder on Facebook. The solicitor told me to always  go through him as opposed to the freeholder. But is there any advantage of contacting the freeholder  privately? One of my relatives contacted the freeholder via Facebook many years ago to buy land, (her garden and a piece of adjoining land in fact, which was still leasehold!) and she had success in buying it (even though he told my relative to go through his solicitor). 

eddddy

topoftherock said:

I think I’ll look to get my own valuation in the next few months then. If I went to a tribunal , would I have to pay a lot of money? Or would I pay a lot of money, if I lost the case and they favoured the freeholder? Please tell me how you arrived at the £14k figure using the yield/discount rate? 

Just to be clear - the £13k to £14k is just the freeholders compensation for loss of ground rent.

There are other components to calculating the cost of the freehold.

My understanding of the Special Valuation Basis described here: https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

... is that you also need to:

ADD 50% of the marriage value, and
SUBTRACT the reversion value

The reversion value is probably small (about 7% of the house's current freehold value, as if it had no bathroom, modern kitchen etc), so the marriage value is the important bit.

As discussed in a previous thread, you need to assess the marriage value as if the house has no inside bathroom, no modern kitchen, and none of the other improvements made since the lease was first granted.

eddddy

Just to give you a bit more background. If the freeholder used a 'proper' RICS valuer to value the freehold, the freeholder will probably have a report saying something like this (obviously these numbers are made up)  :


"If you went to tribunal to determine the cost of the freehold, in our opinion, the outcome is likely to be in this range:

Best Case: £28k
Worst Case £20k
Most likely case: £24k

Therefore we suggest that you make an initial offer of £30k"

Armed with that knowledge, the freeholder can make any offer they like, such as £25k, £30k, £32k, £40k or £50k.

So the freeholder holds all the cards - they have all the 'inside knowledge', and you have none.

If you got a RICS valuer's report yourself, you would have similar 'inside knowledge' - to help you negotiate.

topoftherock

eddddy said:

topoftherock said:

I think I’ll look to get my own valuation in the next few months then. If I went to a tribunal , would I have to pay a lot of money? Or would I pay a lot of money, if I lost the case and they favoured the freeholder? Please tell me how you arrived at the £14k figure using the yield/discount rate? 

Just to be clear - the £13k to £14k is just the freeholders compensation for loss of ground rent.

There are other components to calculating the cost of the freehold.

My understanding of the Special Valuation Basis described here: https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

... is that you also need to:

ADD 50% of the marriage value, and
SUBTRACT the reversion value

The reversion value is probably small (about 7% of the house's current freehold value, as if it had no bathroom, modern kitchen etc), so the marriage value is the important bit.

As discussed in a previous thread, you need to assess the marriage value as if the house has no inside bathroom, no modern kitchen, and none of the other improvements made since the lease was first granted.

Thanks for the info! 

topoftherock

eddddy said:

Just to give you a bit more background. If the freeholder used a 'proper' RICS valuer to value the freehold, the freeholder will probably have a report saying something like this (obviously these numbers are made up)  :


"If you went to tribunal to determine the cost of the freehold, in our opinion, the outcome is likely to be in this range:

Best Case: £28k
Worst Case £20k
Most likely case: £24k

Therefore we suggest that you make an initial offer of £30k"

Armed with that knowledge, the freeholder can make any offer they like, such as £25k, £30k, £32k, £40k or £50k.

So the freeholder holds all the cards - they have all the 'inside knowledge', and you have none.

If you got a RICS valuer's report yourself, you would have similar 'inside knowledge' - to help you negotiate.

Very sound advice eddddy. In fact, I’ve already contacted a few local RICS surveyors today who specialise in purchasing the freehold with a statutory extended lease.  Just waiting on their prices. Do you have any idea, of how much it costs to go to a tribunal?