Freeholder low balls offer to buy me out. What do I do next?

[Behemoth]

For many years, I've owned a flat in central London and it has relatively little mortgage left to pay on it. It's on top of an office block that the new freeholder has now got permission to turn residential. He wants to buy me out and wants to contract quickly.

They've low balled me an offer which is 5% below the bottom of Zoopla estimate and takes no account of my transaction costs to stay still. I rent my flat out, so to be standing still will cost me loads in stamp duty, CGT, a search for new property etc etc. In addition, his net internal area offer doesn't consider valuable common areas which I have leaseholder rights to, both private (garage, balconies) and shared (roof terrace, garaging, utility and plant rooms).

My aim is to sell if all my costs are covered and a meaningful sum is added for the sheer inconvenience of it all. Otherwise I would stick and let them build what they want underneath me. The value to them of my redeveloped flat plus its various bits of leasehold common area must be substantially above the market price of my flat alone today. There are a dozen other leaseholders in a similar situation but I can't see us being able to negotiate as a team.

It's the beginning of the negotiation process. Aside from first getting my place valued by 2 or 3 local agents, how should I respond & proceed? Any constructive advice is most welcome.

[Behemoth]

Pheo said:

what happens to him if you don't sell?

He can still build out downstairs, but he doesn't get access to a very valuable top floor, ground floor garaging etc. He cannot, as far as I understand, force a sale. In fact, I believe his initial freehold transaction is suspect as I was never offered a right to buy. I'm still trying to find out the full implications of this but at the very least, it has him on the back foot.

Good point about reframing. But I have to be sure any offer I put forward includes the true potential of the property and not just the current market value of my flat + costs. To pin that down, I think I need more than a bog standard estate agent.

[Behemoth]

Sound advice, thank you for the responses. For clarification, it isn't just me at the top & though some are with my train of thought, we'd be hard pressed to get everyone singing from the same hymn sheet.

[Behemoth]

Davey S2 said:

You mentioned that the main part of the building is offices so if there are only a few flats then you may not satisfy the criteria

The building was mainly office and has now been reclassified fully residential. So yes, we couldn't before. But we can now.

[Behemoth]

Oi_Oi_Savaloy said:

If you (leaseholders) are all talking then perhaps it's worth trying to buy the freehold yourselves and then taking advantage of the re-development potential of the site?

Yes, we've looked into that. But it's too big a project for most, even as an empty shell.

[Behemoth]

CAPP0 said:

If it's any help, my parents' house was compulsorily purchased some years back, by the government, and they were offered market value +10%. Not exactly the same situation obviously but may be a yardstick to work by?

I feel for your parents - it's a paltry sum considering the major expenses involved in searching & moving. We're in a more complex and commercial situation, so 10% over market is nowhere near good enough. But as you suggest, it shows how totally off the low-ball offer actually is.

[Behemoth]

AndrewO said:

How many years on your lease ?

Just over 100

[Behemoth]

AndrewO said:

You will be unlikely to negotiate a price close to what it will be worth after the improvements. CGT will also wipe 40% of your profit if you sell (assuming you never lived there)

I'm not sure about that. Redevelopment of the complete building rather than just the floors below me will yield way more £/sqft than existing.

40% CGT?? Who is advising you? CGT is 28% (18% if basic) and has various offsets. But still, it's certainly a tidy sum that has to go into the thinking.

[Behemoth]

lepetitoeuf said:

But you can't use that as a comparison starter point as it only applies to primary residences, I don't think they give you the 10% if it's an investment property.

It's not a compulsory purchase in any way shape or form.

[Behemoth]

lepetitoeuf said:

Really? You hadn't mentioned that

Maybe you should move this to the business forum rather than the homes forum.

I think if you read the full thread, you will realise this is not about compulsory purchase. It's about an offer on the table from the freeholder. I think compulsory purchases can only be done by government.

Since I'm asking for opinions on property valuation, freehold & leasehold isn't this the perfect place to discuss?

[Behemoth]

ColinM50 said:

BTW, did you say why you don't want to buy their part of the building and do the redevelopment yourself? It can't be for money since theirs tons of cheap cash around for this type of project right now.

Doing this is a possibility and some of us are interested. But we'd be talking about raising a very large sum of money. It's about 85K sq ft all together. It's not a small project. Where would be your first port of call to raise cheap cash?