Collective Enfranchisement for Law Firm

Freehold collective enfranchisement valuation on behalf of the lessees of a period converted house in Streatham

A Central London law firm provided instructions to act on behalf of several participating lessees as part of a collective enfranchisement.

The property comprised a substantial detached, period house arranged over ground and part 1/part 2 upper floors arranged as 4 self-contained flats.

Following receipt and confirmation of instructions, an inspection of all of the flats was undertaken including the roof space which was demised to the Freeholder. A valuation report was produced to show our opinion as to a reasonable level of premium to acquire the freehold interest, together with an acceptable settlement range and recommended figures to be inserted into the initial notice of claim.

The valuation of the premium was calculated from several elements; namely the reversionary value of each interest including the capitalisation of ground rent, the value of appurtenant land and potential loss of development rights. A 5% deferment rate was applied to the reversionary values (as per Spotelli vs Cadogan (2007) and a 6.25% capitalisation rate was adopted to the ground rent to reflect the attractiveness of the income stream.

Negotiations ensued with the freeholder’s valuer with the main element of contention being over the loss of development rights to the undemised roofspace. The freeholder contented that the roofspace could be developed to create an additional self-contained residential unit although would have meant that the common parts would have to have been reconfigured to create a means of access. Several pre-application advices were sought by the freeholder although the Local Authority were not convinced that the new unit would meet the minimum requirements based on headroom over 1.5m.

A statement of agreed facts and matters in dispute was drawn up and agreed between the parties after which formal expert valuation reports were exchanged. The case proceeded to the First Tier Tribunal, at which the firm represented the leaseholders. The reversionary values were agreed between ourselves and the freeholder’s surveyor although the matter was then referred back to the County Court over a dispute regarding the validity of the initial notice. However, the matter was later settled at a premium value marginally lower than our reported valuation thus obviating additional costs and uncertainty for the client if the matter were to have proceeded again to third party determination.