Freehold value on the open market

[oakhill]

If the company that owns the freehold of our flats decided to sell the freehold on the open market - having first offered it to the leaseholders and failed to agree a price - what sort of price could he expect to achieve? Details are:
- 16 flats
- 70 years lease remaining
- current ground rent £50 per flat, increasing to £75 at 50 years or go and £100 at 25 years to go
- current value of each flat - who knows - but say £135K

And what is the main motivation for an outside organisation to buy this sort of freehold? There is no opportunity to profit from managing the flats since all such rights are vested in the management company owned by the freeholders.

Just curious, since the freeholder is using his option for selling elsewhere to tempt the leaseholders to buy the freehold from him.

[Poppy]

Two motivations: collecting ground rent and charging a premium for lease extensions.

[Gordon999]

Every leasehold flat falling below 70 years term has to extend or the property becomes unsellable as future buyers have difficulty getting a mortgage. Lease extension for any flat below 80 years will cost extra due to inclusion of 50% of marriage value.

If you look at the recent thread called " Lease extension 75 years" started by Richakn on 29/10/09 and study reply in post #3. which has calculated the cost of lease extension to be about 21.4K for property valued at 370K =6% approx. So expect your flat extension of 90 years to cost around 9-10K.

Leaseholders are really in a poor negotiating position versus the freeholder as the clock is against them. So you should get the other leaseholders to wake up and think again.

[sgclacy]

I would agree that the cost of a lease extension would be around £10k each.

So the total enfranchisable value would be circa £160k (assuming no development value)

THE MARKET PRICE (i.e. what an outside investor would pay) for such a freehold would be around 85%-95% if in London and around 75% to 85% outside of London.

The market for such investments is extremely strong at present with a number of small funds paying very high figures indeed to acquire such investments.

[oakhill]

THE MARKET PRICE (i.e. what an outside investor would pay) for such a freehold would be around 85%-95% if in London and around 75% to 85% outside of London.
That's very interesting. I assumed it would be the total enfranchisable value (your estimate of £160K) minus the marriage value share already included in the £160K.