Can anybody tell me how to value a semi det. in a very good Dublin suburban location,tenant is 82 years old and on a fixed rent of £250 per month. I do all the repairs. Her mother was the first tenant and the present tenant succeeded her when she died .
The house would be worth circa £500K if vacant but the tenant has the right to stay for life, rent is court approved and cannott be increased…is there a formula for valuing this type of property ?
Ouch, well, 14 times annual rent is… €42,000
Is there any other relative likely to take over the rent after this lady?
I think solicitors and accountants who specialise in probate work do this sort of valuation all the time.
Property is usually left by the deceased to the surviving husband or wife. But for several reasons, it can sometimes be left to a son or daughter, but with the surviving husband or wife having a right of residence. This right lowers the value of the property, and this is reflected in a lower valuation for the purposes of Capital Acquisitions Tax owed by the son or daughter.
If you’re interested in achieving a high valuation, then before you go talk to a probate specialist, remember that they are normally interested in achieving a low valuation for tax purposes.
that’s called a ‘sitting tenant’ if i recall correctly, and from what I remember the legislation passed in 06’ but kicking in in 08’ abolished the existence of the claim to stay for life, in essence paving the way to develop lots of places that were previously unable to be developed due to such tenants having residency. so i hire a solicitor who does these valuations or turf tenant out and go for open market price. depends on whether or not you plan on getting into heaven someday.
I would speak to an actuary or actuarial student…
Basic idea :
Value of property
= value of similar uncontrolled property
- value of market rent (increasing annuity for tenants lifetime based on todays market rent and an assumption for rent increases)
- value of controlled rent (regular flat annuity value on same assumptions)
- reserve for hassle of selling on again.
The annuity might want to consider the possibility of the resident moving out before death (into a nursing home, for example)
Also speak to a solicitor / other professional re the lease, I believe it is possible to evict the sitting tenant in certain cases.
You need to check the legal position to see if there is any chance that somebody else can take over or succeed to the controlled tenancy and whether they can acquire any rights to a new tenancy.
If the lease ends upon the tenant’s death then you have two elements to value:
- The value of the landlord’s interest in the lease for the residue of her expected lifetime.
- The value of the reversion (i.e. the right to get the house back ofter the lease terminates.)
As others have said, you will definitely need a solicitor’s advice and an actuary’s advice.
Thanks all, some good pointers particularly the actuarial bit. I think i need a specialist solicitor.