There was one further factor, which
we had to consider. The residents had
decided that they had no wish to be
property investors and whilst they
wanted to buy the freehold reversion,
they had no desire to be holding
reversionary values in the 65year
leases of the men’s club, the garages
and non-participating flats. In our
view, this meant that the residents
had to find a property investor as a
partner who would be willing to take
999 year leases on the investment
elements of the freehold reversion.
There was a property investment
company who owned a number of flats
in the block and they expressed an
interest in acquiring the reversionary
element of the non-participators flats,
the men’s club and garages.

We provided our clients with a
valuation on the basis that they were
compulsorily acquiring under the
legislation with 53% of the residents
participating in the purchase. This
valuation amounted to £529,000.00.
We advised our clients that this price
would not be achieved in a public
auction because the investor would
not know the number of participators
and therefore would not be prepared
to pay marriage value.

Our second valuation was on an
investment basis only. We capitalised
the income flow and then assessed
the reversionary value of all the flats,
the men’s club and the garages and
deferred the values for the unexpired
term of each lease. This valuation
amounted to £284,000.00 and we
advised the residents that this would
be the minimum price that would be
achieved at auction because it did not
take account of any hope value or
future development value of the 2.2

acre site. We advised our clients that
we were of the view that a higher
price than £284,000.00 would be
achieved because any prospective
purchaser would know that because
the residents had exercised their right
of first refusal, there were at least
50% of the residents prepared to buy
the freehold. We accordingly advised
our clients that the auction sale price
may be 35 – 40% higher, namely
approximately £400,000.00.

The Auction
Our next step was to discuss the
auction. We advised our clients that
it was important that the auction was
attended by at least one member of
the residents association together
with representatives from this firm.
We felt it was important that we knew
who was bidding for the property, that
the auctioneer’s assistants knew that
the residents were present in the
room and also to see who the last
bidder was.

On the day of the auction we arrived
early so that we could get a feel for
what was happening in the auction,
the enthusiasm for the lots and the
general state of the market. The
atmosphere in an auction room can be
varied. At times it can be electric with
enthusiasm and many bidders
competing against each other. This
has the effect of increasing the prices
paid. Conversely, the mood in the
auction room can be muted with only
one or two bidders competing for a
specific property. When we arrived at
the auction, we announced our
presence to an auctioneer’s assistant
and asked the assistant to convey to
the auctioneer that there was an error
in the particulars which needed to be
corrected. When the time came for

the property to be sold, we positioned
ourselves in strategic positions around
the room so that we could see who
the bidders were. By this time, the
mood in the auction room had become
quieter and from the mutterings it
was clear that because the auctioneer
had disclosed that the residents were
going to exercise their right of
purchase, potential investors had
decided not to bid. We noted that
there were only three bidders for the
property and what was dissuading
bidders was the fact there is very
little attraction for an investor to
waste his time having the property
knocked down to him at auction,
paying a 10% deposit and then having
to sell to the residents when the
residents exercised their option. The
property sold for £345,000.00 at
auction which was an excellent result
for the participating residents.

Post Auction
After the auction, we assisted our
clients in negotiating a sale of the
reversionary interests in nonparticipating parts of the freehold,
namely the men’s social club, nonparticipating flats and garages.

Our client’s nominee company then
exercised their right to purchase and
bought the property one month after
the auction.

The residents are extremely satisfied
with the result and are now in control
of their own destiny, are able to
implement a maintenance programme
which will ensure that the block is
improved to the standard set out in
the leases and in keeping with this
pleasant residential area of London,
which is also a conservation area.