Collective Enfranchisement for Private Individual

Freehold enfranchisement valuation advice on behalf of the lessees of a converted property in Crystal Palace

Several lessees of a property in south London instructed the firm to carry out a collective enfranchisement in order to purchase the freehold interest .

3 of the 4 lessees wished to participate in the acquisition and a valuation was prepared in accordance with the  Leasehold Reform, Housing and Urban Development Act 1993 (as amended) in order to determine the likely level of premium (net of costs) to be paid to the Freeholder.

The subject property comprised an end-of-terrace period house planned on lower ground, ground and two upper floors which had historically been converted to 4 self-contained flats. There were small communal gardens to the front and rear of the building. The leases of the 3 participants were held on co-terminus terms each with  approximately 82 years remaining at a rising ground rent.

After carrying out an inspection of the units (including the non-participating flat) and completing all due diligence, a valuation was prepared together with premium calculation which also took account of any value attributable to appurtenant land and loss of development rights.

The roof space had been converted prior to the grant of the lease of the upper part and we attributed no value in respect of any further possible development. A premium of £1,500 was placed on the value of the appurtenant garden areas.

Based on comparable sales of similar type properties in the local area, freehold values were placed on each of the 4 flats based on the properties being in repair but unimproved. The ground rents were capitalised at a suitable rate based on the attractiveness of the income stream. Marriage Value was not applicable in the calculation as the leases had unexpired terms over 80 years.

A deferment rate of 5% was adopted for deferring the reversionary values, as per the landmark Lands Tribunal decision in Sportelli v Cadogan Estates (2007).

A capitalisation rate of 6% was applied to the ground rents, based on the level of the income stream and review pattern which was every 15 years of the term.

The report stated a Freehold premium of £38,500 (with breakdown of values for individual flats and appurtenant land). The reversionary value of the non-participating flat was split between the 3 participating lessees who would, at completion of the transaction, acquire a third share of the freehold reversion. A recommended figure was provided to assist in the service of the s.13 notice of claim together with an acceptable settlement range.