Case Study
Secured lending valuation undertaken on behalf of Norwich & Peterborough Building Society.
Description
A mid-terraced, two storey converted business unit arranged as office accommodation over ground and first floors.
Tenure
Leasehold (97 years unexpired)
Tenancy
Vacant Possession
Pertinent Issues
During the course of our due diligence we discovered that the interest being purchased contained a restrictive user clause which permitted ‘light industrial/general industrial or warehouse'. Therefore, the property could not be utilised as offices. This would have a negative effect on marketability.
We provided a valuation of the property with the burden of the restrictive user clause and also reported a Market Value assuming a ‘deed of variation' permitting removal of the restrictive user clause.
We advised the lender to make its lending decisions based on the Market Value with burden of the restrictive user clause which was in place. We further advised that upon grant of the deed of variation that our reported Market Value (assuming the clause was removed) should be relied upon.
The purchaser successfully negotiated a deed of variation and the lender was able provide a loan against the higher of the report Market Values.
Market Value: £195,000 (with restrictive user clause)
Market Rent: £14,000 per annum (with restrictive user clause)
Market Value: £375,000 (assuming a deed of variation is granted)
Market Rent: £23,500 per annum (assuming a deed of variation is granted)