How to value freehold post-LAFRA?

ChillyWill

Hi gang.

I live in a building that has three leasehold flats. The owner of the freehold is not one of the owners of the three flats, but has contacted us saying that they want to sell the freehold.

Obviously they have to give us first refusal and have contacted all three owners with an offer per-flat using a freehold calculator. 

Obviously we would rather acquire the freehold VS it fall into the hands of a third party, although we understand that as a result of the Leasehold and Freehold Reform Act, the law is changing around what freeholders can do and charge their freeholders etc.

My question is, as a result of these new laws, will the freehold become fundamentally less valuable if the owner were to sell it to a third party and if so, how do we work out a more realistic value or at least provide some concrete grounds on which to negotiate?

Many thanks for any/all advice.

/ Will

eddddy

ChillyWill said:

My question is, as a result of these new laws, will the freehold become fundamentally less valuable if the owner were to sell it to a third party and if so, how do we work out a more realistic value or at least provide some concrete grounds on which to negotiate?

The key difference will be that the freeholder will have to pay they own legal/valuation fees if leaseholders buy the freehold through collective enfranchisement - instead of the leaseholders paying the fees.

The cost of the freehold itself might stay the same or might even increase (unless any of the leases have less than 80 years left to run).


BUT... are you saying that the freeholder has approached you informally with an offer, and so you want to negotiate?


If your freeholder really does want to sell, you might be better off ignoring your freeholder's offer, and waiting until the freeholder has found a buyer on the open market.

Then the freeholder (probably) has to serve you with a section 5 notice which gives leaseholders the Right of First Refusal. (i.e. the right to buy the freehold at the same price another buyer has offered.)

Then you'll know that you're only paying the same as a 'hard nosed investor' buyer is willing to pay.

Here's some info on the Right of First Refusal: 
https://www.lease-advice.org/advice-guide/right-first-refusal/
https://www.lease-advice.org/fact-sheet/right-first-refusal/

ChillyWill

This is brilliant @eddddy - thank you.

ChillyWill

Just bumping this discussion as we’ve had some more POV’s… including someone saying that a standard way of calculating can be 10X ground rent… and another saying that they bought the freehold off their owner for £1 because they didn’t want the hassle!

Sure the latter is an exception but would still value any other opinions on how to counter-offer and negotiate its value.

Thanks!