There are many factors that contribute to and can affect the value of your freehold asset. These factors can include the amount of ground rent payable by the leaseholder throughout the duration of the lease, the location and value of the property and the number of years remaining on the lease term.
Ground rent is the yearly rent paid from the leaseholder to the freeholder over the length of the lease term. Most leases differ and some offer ground rent which is fixed throughout the duration of the lease term and others include rent revisions with increases set at particular intervals of the lease.
The value of the Freehold Reversion can also be determined in part by the location of the property. It is a known fact that there is a clear distinction between properties based in prime and central London in comparison to the rest of the UK as rents from such prime properties are thought to be more valuable and reliable than those from less exclusive properties.
The value of the freehold can also be significantly affected by the length of the remaining lease term as the Freeholder must be compensated to grant an extension to the term. The fewer number of years remaining, the higher the cost to extend. If a lease was to expire, the property would revert back to the freeholder. Once a lease term drops to below 80 years, marriage value is added to the premium. Marriage value, in simple terms, is 50% of the difference in property value based on the property having a low lease (under 80 years) or a good length lease (above 90 years).
As a freeholder you have different options available when you decide to organise a valuation. For example, you could employ a chartered surveyor to provide a valuation report or another option would be to speak with an auction house to obtain a guideline for a possible sale price. If you would like a free appraisal from a freehold investment company, simply contact us and we will provide a free guide and possibly a cash offer if the freehold is of interest to us.
The freehold will always be worth more to the leaseholders as they gain the most by owning the freehold to their properties. If they decide to purchase the asset, they gain full control of the building which enables them to keep maintenance costs down. They no longer pay ground rent as they are the freeholder and should they wish to make any variations to their lease, they will incur minimal costs.
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