Carr & Earl occupy the vehicle repair depot at Fenham Barracks on a lease, which contained an option to purchase. We were instructed by Carr & Earl to act on their behalf in agreeing a price with the landlord.
The case was complicated because the definition of value in the lease was not clear. The landlord went to considerable expense of obtaining an opinion from one of the most respected property barristers in the UK. The opinion concluded that “hope value” could be considered when determining the price.
The landlord then produced some planning advice, which concluded that it may be possible to secure planning consent for the redevelopment of the site for student accommodation. Because of this, the landlord argued that the price should be over £1M.
Development Planning Partnership (DPP) in Newcastle gave us some planning advice. This concluded that the site was in an area zoned for employment use and securing planning consent for a change of use to student accommodation would not be straight forward. Because of this, we could not agree the price and the matter had to be referred to an Independent Expert for a determination.
The landlord’s surveyor argued that as planning permission for student accommodation could be secured then the Expert should reflect “hope value” in the valuation figure. We submitted that, because there was serious doubt that planning permission would be granted, no one would pay “hope value”, particularly in the current market. More importantly, we carried out a full assessment of the student housing market in Newcastle and identified an oversupply of sites that already had planning permission for student accommodation. This made the site even less attractive to that sector of the market.
The Expert ultimately awarded a price of £600,000, which was much closer to our opinion than that of the landlord’s surveyor. We had offered around 10% more than this figure during the negotiations so not only did we win with the Expert, we also achieved a price that was less than we were prepared to pay.
Paul Reed, Dealer Principal of Fawdington commented “Andy Tucker has helped us with property related issues for over the last 10 years, during which time we have been very pleased with his advice. We all thought that this would be a straight forward job and that there would be little difficulty agreeing a price with the landlord or his surveyor. Unfortunately, things became very complicated when the concept of “hope value” was introduced.
“At the outset Andy Tucker advised us that the value should be somewhere between £550,000 and £650,000. We were prepared to pay £650,000 to avoid the extra costs of the Independent Expert proceedings. The landlord’s surveyor asked the Expert to award a figure of £1,077,500 but the Award was just £600,000!”
“I was very pleased with the outcome and whilst the cost of the process was an “eye opener”, the end result meant that the costs were easily absorbed by the saving. We did the right thing and followed Andy Tucker’s advice to run with the Independent Expert determination.”
“I have learnt through many years of dealing with the premium BMW brand that, as a customer, you get what you pay for. On this occasion, I happened to be the customer and it was certainly worth paying for this service”.