freeholder charge for allowing extension into loft.
Discussion
Need to pick the pistonhead brains please.
I own the freehold of a shop on ground floor , and the flat above.I own the roof and the airspace.I own the shop also.
Owner of flat has requested to extend into loft , 2 bedrooms , and bathroom.
As flat is a hmo , the extra 2 bedrooms would give them 1k a month extra income.
How much should I ask to allow them to proceed? Is there a formula? Thanks!
I own the freehold of a shop on ground floor , and the flat above.I own the roof and the airspace.I own the shop also.
Owner of flat has requested to extend into loft , 2 bedrooms , and bathroom.
As flat is a hmo , the extra 2 bedrooms would give them 1k a month extra income.
How much should I ask to allow them to proceed? Is there a formula? Thanks!
davidc1 said:
Need to pick the pistonhead brains please.
I own the freehold of a shop on ground floor , and the flat above.I own the roof and the airspace.I own the shop also.
Owner of flat has requested to extend into loft , 2 bedrooms , and bathroom.
As flat is a hmo , the extra 2 bedrooms would give them 1k a month extra income.
How much should I ask to allow them to proceed? Is there a formula? Thanks!
Not clear who "owns" what here, the post doesn't make sense. I imagine there are freehold/leasehold considerations at play but very unclear.I own the freehold of a shop on ground floor , and the flat above.I own the roof and the airspace.I own the shop also.
Owner of flat has requested to extend into loft , 2 bedrooms , and bathroom.
As flat is a hmo , the extra 2 bedrooms would give them 1k a month extra income.
How much should I ask to allow them to proceed? Is there a formula? Thanks!
davidc1 said:
Need to pick the pistonhead brains please.
I own the freehold of a shop on ground floor , and the flat above.I own the roof and the airspace.I own the shop also.
Owner of flat has requested to extend into loft , 2 bedrooms , and bathroom.
As flat is a hmo , the extra 2 bedrooms would give them 1k a month extra income.
How much should I ask to allow them to proceed? Is there a formula? Thanks!
Que? I own the freehold of a shop on ground floor , and the flat above.I own the roof and the airspace.I own the shop also.
Owner of flat has requested to extend into loft , 2 bedrooms , and bathroom.
As flat is a hmo , the extra 2 bedrooms would give them 1k a month extra income.
How much should I ask to allow them to proceed? Is there a formula? Thanks!
So who owns what? What are the interests?
My understanding is:
You own the Freehold of the entire building, shop, flat and loft space.
The flat is let out on a long (say 99 or 125 year) lease to a third party?
Is that correct?
sorry not to be clear.
i own the freehold for the entire building (and the roof/airspace) and i also own the shop on the ground floor.
the owners of the flat above the shop want to extent into the loft , to give 2 bedrooms and a bathroom.lease on flat is 125 years.
how would i work out the price to give them authority? bearing in mind they would get another 1k a month in rent on the extension.
thanks!
i own the freehold for the entire building (and the roof/airspace) and i also own the shop on the ground floor.
the owners of the flat above the shop want to extent into the loft , to give 2 bedrooms and a bathroom.lease on flat is 125 years.
how would i work out the price to give them authority? bearing in mind they would get another 1k a month in rent on the extension.
thanks!
Are you sure they don't have a lease of the loft space and they are just asking for your consent as that's a requirement of the lease, with "such consent not to be unreasonably withheld". Such a phrase is commonplace in leases. If they are asking for consent make sure you are actually permitted to withhold consent - check the demised area within their lease.
As for calculation of value, at a guess, if the loft is not already demised to them then perhaps 33% of the uplift in value of the flat as a result of the works.
As for calculation of value, at a guess, if the loft is not already demised to them then perhaps 33% of the uplift in value of the flat as a result of the works.
The rule as established by Stokes v Cambridge 1961 was that 33% of the value of the uplift in value should be applied to a piece of land.
Granted this was for a ransom strip to develop land and not a flat extension so is totally different as a base point, but in the absence of any other formula it seems a good rule of thumb I guess. IE: You have something they want and need for development.
Another way of doing it may be
Uplift in value caused by extension - cost - less an element of profit for doing it (it understandable they would want a bit of equity for their trouble) = the amount they can afford to pay you.
Again as a really broad rule of thumb land/costs/profit can be split into 3 x 33% sections.
Ultimately its a horse trade and you need to reach a fair figure. See what 33% of uplift gets you and ask yourself if you are happy with that.
Granted this was for a ransom strip to develop land and not a flat extension so is totally different as a base point, but in the absence of any other formula it seems a good rule of thumb I guess. IE: You have something they want and need for development.
Another way of doing it may be
Uplift in value caused by extension - cost - less an element of profit for doing it (it understandable they would want a bit of equity for their trouble) = the amount they can afford to pay you.
Again as a really broad rule of thumb land/costs/profit can be split into 3 x 33% sections.
Ultimately its a horse trade and you need to reach a fair figure. See what 33% of uplift gets you and ask yourself if you are happy with that.
update!
owner of the flat has come back with a figure to pay me of 3000gbp , as they have included the cost to build into the workings out...
so miles away from what i think that piece of "loftspace land" is worth.
i was looking for 10 times that amount.to my eyes this is a piece of land , all be it's 50 foot up.
is it just a case of haggling upwards from here , or should i seek guidance from my solicitor?
many thanks again!
owner of the flat has come back with a figure to pay me of 3000gbp , as they have included the cost to build into the workings out...
so miles away from what i think that piece of "loftspace land" is worth.
i was looking for 10 times that amount.to my eyes this is a piece of land , all be it's 50 foot up.
is it just a case of haggling upwards from here , or should i seek guidance from my solicitor?
many thanks again!
25% of the increase in value would be fair I think plus ALL your costs....changing lease, solicitors, land reg etc to add loft space to their lease.
I did similar and sold large loftspace a few yrs ago IIRC £26K and the buyer built a "novel" 1 bed flat valued about £100k when he finished.
eta bear in mind the loft is not accessible for you to make a profit from in any other other than selling to the flat leaseholder. hence if you don't sell you don't have other options and it will just sit there until the lease reverts back in 125yrs time...but by the same token £3k sound a bit of a p..stake
ETA Silly me I just remembered 2 yrs ago selling a basement to the leaseholder above........absolutely no use to me and only useful to him...fairly costly to incorporate into his existing flat so sold for £5k + costs hth
I did similar and sold large loftspace a few yrs ago IIRC £26K and the buyer built a "novel" 1 bed flat valued about £100k when he finished.
eta bear in mind the loft is not accessible for you to make a profit from in any other other than selling to the flat leaseholder. hence if you don't sell you don't have other options and it will just sit there until the lease reverts back in 125yrs time...but by the same token £3k sound a bit of a p..stake
ETA Silly me I just remembered 2 yrs ago selling a basement to the leaseholder above........absolutely no use to me and only useful to him...fairly costly to incorporate into his existing flat so sold for £5k + costs hth
Edited by alfie2244 on Monday 15th August 16:23
Mr Overheads said:
If you deny them the extension, would that force them into selling up. You can then buy it and convert the space yourself and take all the uplift in value (either by renting it out or by selling it again)
I juggled with this for a while but loft conversions can be very tricky and, even being a builder myself, felt I would be too much in the hands of architects / engineers, specialist (spiral staircases) and, importantly, the unknown of developing an old building. I know the purchaser made money after 6 months+ of hassle & stress but I made as much as he did just for signing some bits of paper and no risk whatsoever to myself.davidc1 said:
update!
owner of the flat has come back with a figure to pay me of 3000gbp , as they have included the cost to build into the workings out...
so miles away from what i think that piece of "loftspace land" is worth.
i was looking for 10 times that amount.to my eyes this is a piece of land , all be it's 50 foot up.
is it just a case of haggling upwards from here , or should i seek guidance from my solicitor?
many thanks again!
So you have a so called piece of land 50 foot up that you can't do anything with. Interestingowner of the flat has come back with a figure to pay me of 3000gbp , as they have included the cost to build into the workings out...
so miles away from what i think that piece of "loftspace land" is worth.
i was looking for 10 times that amount.to my eyes this is a piece of land , all be it's 50 foot up.
is it just a case of haggling upwards from here , or should i seek guidance from my solicitor?
many thanks again!
hunton69 said:
davidc1 said:
update!
owner of the flat has come back with a figure to pay me of 3000gbp , as they have included the cost to build into the workings out...
so miles away from what i think that piece of "loftspace land" is worth.
i was looking for 10 times that amount.to my eyes this is a piece of land , all be it's 50 foot up.
is it just a case of haggling upwards from here , or should i seek guidance from my solicitor?
many thanks again!
So you have a so called piece of land 50 foot up that you can't do anything with. Interestingowner of the flat has come back with a figure to pay me of 3000gbp , as they have included the cost to build into the workings out...
so miles away from what i think that piece of "loftspace land" is worth.
i was looking for 10 times that amount.to my eyes this is a piece of land , all be it's 50 foot up.
is it just a case of haggling upwards from here , or should i seek guidance from my solicitor?
many thanks again!
It might cost them £50k to do the loft, you originally wants £33k (based on your 33% uplift in value), so now to gain £100k on their flat they have to spend £88k.
look at it that way... you don't get anything if you are greedy, yet you will get something if priced correctly...
They were taking the taking the mickey with £3k, as you were with 33%.
While there's some merit in looking at the costs vs added value, if it's being run as a business the business income is more relevant. The other party is making a business decision.
You say £12k a year in extra rent, call that 8k in profit, 80k over 10 years, so 40k wouldn't seem entirely unreasonable. But the chances are your man doesn't have £40k + the cost of conversion, so something less or nothing?
Alternatively you could agree no charge and then 50% split on the rental income until such time as he's prepared to buy you out of your joint enterprise. Or somewhere in between.
I would start by having a conversation around his business plan and then steer it in the direction of whether he thinks paying £3k now to make £8k a year forever seems fair to him. His only argument is really that he's the only person that can do this in this property and that he can't pay more than he can afford, which he can get around by paying you with future profits.
You say £12k a year in extra rent, call that 8k in profit, 80k over 10 years, so 40k wouldn't seem entirely unreasonable. But the chances are your man doesn't have £40k + the cost of conversion, so something less or nothing?
Alternatively you could agree no charge and then 50% split on the rental income until such time as he's prepared to buy you out of your joint enterprise. Or somewhere in between.
I would start by having a conversation around his business plan and then steer it in the direction of whether he thinks paying £3k now to make £8k a year forever seems fair to him. His only argument is really that he's the only person that can do this in this property and that he can't pay more than he can afford, which he can get around by paying you with future profits.
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