Joint freeholders of a building

[Roger71]

I am one of flat owners in a building consisting of 5 self contained flats. Six years ago we had the opportunity to buy the freehold. Four ou us then got the freehold for which we had to pay an x amount to the previous freeholder. The fifth owner now wants to join and become the freeholder.
The question is - That when we decided to take the freehold the property market was quite low. The property prices have risen 20 percent for our flats since then. How can it be calculated as to how much to charge this fifth person to join now.

 

[Nicholas Wallwork]

Hi @Roger71

The best thing to do is get 3-4 local valuers or reputable commercial agents to value it based on today's market. They will know the local area best and they'll also look at other comparables and the freehold market in general. Take the average of the valuations provided one isn't way out (either high or low)...

How much did you pay out of interest?

Bare in mind the freehold won't go up in line with property prices in the same way, it's more in line with the ground rents you pay as this is the only income really for a freeholder.

 

[Roger71]

Hi @Roger71

The best thing to do is get 3-4 local valuers or reputable commercial agents to value it based on today's market. They will know the local area best and they'll also look at other comparables and the freehold market in general. Take the average of the valuations provided one isn't way out (either high or low)...

How much did you pay out of interest?

Bare in mind the freehold won't go up in line with property prices in the same way, it's more in line with the ground rents you pay as this is the only income really for a freeholder.

We paid 20,000 pounds total

 

[Nicholas Wallwork]

In this case, the ownership is more about you having full control of the building as owners rather than having a significantly good investment tradeable in it's own right. It might add a bit to the price of your apartment but as a freehold in it's own right it will be hard to value (as all the value is mainly to you guys). Do you pay any ground rent / service charges or do you just split any communal costs when they are required? As freeholders potentially you could charge a high ground rent and recoup some running costs from the 5th owner this way if nothing is charged right now?

You could add value to the freehold by agreeing a ground rent to charge yourselves and have a management company manage the building. The freehold would then become a tradeable asset in it's own right potentially as well as being easier for a valuer to value it! If this is already being done then it will have a value which a good valuer can determine.

Good luck but I'd say £5k+ would seem a fair price

 

[Nicholas Wallwork]

Hi @Roger71 have a go with this Freehold valuation tool to give you a ball park valuation if you're already charging ground rents:

http://www.freeholdvaluation.com/ballparkvaluation.htm

 

[nmb]

Surely it would be fair to recalculate the base amount of £20,000 at today's equivalent value compared to £20,000 six years ago (just under £24,000 using a nominal inflation rate of 3%).

Or am I being a bit unfair?