Posts with tag: leaseholds

£200 Fee Cap on Leasehold Packs will Leave Landlords out of Pocket

Published On: July 24, 2019 at 9:06 am

The Government has proposed a £200 fee cap for landlords producing leasehold packs.

However, private wealth law firm Boodle Hatfield believe that this is likely to leave landlords significantly out of pocket.

A consultation on leasehold reform was recently held, to which the Ministry of Housing, Communities and Local Government responded with a proposal to set a maximum amount for what a landlord can charge a leaseholder to produce a leasehold pack. They have said that it should be capped at £200 plus VAT.

Boodle Hatfield believes that the costs for producing this information are often significantly higher. In London especially, costs can easily reach more than £750 per pack.

A leasehold pack is required by landlords whenever a leasehold unit is sold. This pack contains information on the management of the freehold, ground rent and service charges, buildings insurance, and any disputes relating to the property. This is vital information that the purchaser needs to have.

Previously, landlords have been allowed to pass on the full cost of producing the pack to the leaseholder.

Some landlords own blocks of flats with a large number of individual leaseholds, which can require the production of many of these packs each year. Each would incur a loss of more than £500 under this proposed reform.

In a block of 50 flats, Boodle and Hatfield have pointed out that it would not be unheard of for there to be ten sales in a single year. Under these reforms, this would equate to the landlord incurring a loss in costs of as much as £5,000 per year.

The law firm says that the Government needs to take into account the property industry’s responses to the leasehold reform consultation, many of which argued that the proposed £200 fee cap is too low for the London market.

Simon Kerrigan, Partner in the Real Estate team at Boodle Hatfield, says: “A £200 cap on the fee for a leasehold pack will make producing them a significant money-loser, especially for landlords in London.”

“Producing the detailed information required for a leasehold pack takes two or three hours of work by a lawyer. The proposed fee cap is simply too low to pay for that.”

“Before these reforms are enacted, the Government should look again at the burden it is proposing to place on landlords. A cap closer to the realistic cost of £750 for London landlords would be much more appropriate.”

Government to Crack Down on Leaseholds for New Build Houses

Published On: October 16, 2018 at 9:00 am

Author: Em Morley

Categories: Property News

Tags: leaseholds,property market

The Government has announced that it will crack down on leaseholds for new build houses, guaranteeing that almost all new build houses will have to be sold as freehold, while ground rents will be capped at just £10 a year.

The Government made the announcement at the weekend, and the Communities Secretary, James Brokenshire MP, launched a new consultation on the plans yesterday.

According to Government statistics, leaseholders currently pay an average of more than £300 ground rent per year, with some paying up to £700.

There was no suggestion that the move will be retrospective, indicating that some recent homebuyers could still find their properties difficult to sell.

Government to Crack Down on Leaseholds for New Build Houses

Brokenshire said: “Unfair ground rents can turn a homeowner’s dream into a nightmare by hitting them in the back pocket, and making their property harder to sell.

“That’s why I’m taking concrete action to protect homeowners and end those unscrupulous leasehold practices that can cost tenants hundreds of pounds.

“While leasehold generally applies to flats with shared spaces, a number of developers have been increasingly selling houses on these terms, placing further financial burdens on those looking to buy a house of their own through unnecessary surcharges like ground rent.

“This can also mean that selling their home is more expensive and take longer than selling a freehold property.

“Under the Government’s proposals, which are subject to consultation, the majority of new houses will be sold as freehold, and future ground rents will be reduced to a nominal sum.

“The consultation will also seek views on what are the appropriate and fair exemptions, such as shared ownership properties and community-led housing to ensure consumers’ best interests are at the heart of the property market.”

The announcement also made reference to the Tenant Fees Bill, saying that the new crackdown on leaseholds “builds on action under way to make the property market fairer, including a crackdown on rogue landlords and ending unfair charges for tenants”.

The consultation will now run for six weeks. Estate agents have been invited to comment.

The Chief Executive of NAEA Propertymark (the National Association of Estate Agents), Mark Hayward, responds to the announcement: “Thousands of homeowners across the country are facing escalating ground rents, charges for making alterations to their properties and unable to sell their home. Therefore, it’s only right the Government looks to crack down on unfair leasehold practices, to stop even more people feeling trapped in homes they cannot afford to continue living in.

“Our recent Leasehold: A Life Sentence? report found almost half (45%) of leasehold houseowners didn’t know they were only buying the lease until it was too late, two thirds (62%) feel they were mis-sold and the vast majority (94%) regret buying a leasehold. This shows that, for too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property.”

He adds: “However, this announcement is only good news for those looking to buy a leasehold property in the future. With 4.2m leasehold properties in England, many will remain stuck in their lease with no straightforward way out and the industry needs to help them.”

Leaseholds on new builds could be banned under new proposals

Published On: July 25, 2017 at 11:08 am

Author: Em Morley

Categories: Property News

Tags: government,leaseholds,new-build properties,rents

So-called unfair charges levied on purchasers of new-build houses could be banned in England, under a new crackdown proposed by the Government.

Leaseholds on new build properties would be prevented, while ground rents could also be dramatically reduced, under plans set for public consultation.

Fees

Some new-build property owners have found that they were permitted to pay large amounts of money for features that could be considered as ordinary. These included putting up a conservatory, changing floor materials or simply painting their garden fence!

In addition, spiralling ground rents, which can double over the course of a decade, are also leaving many out of pocket.

Government figures suggest that 1.2million leasehold houses are present in England, with this number rapidly increasing. The Government has acknowledged that the terms of some of these leases are becoming more-and-more onerous to those purchasing leasehold properties. Many are left needing to find thousands of pounds to pay their freeholder in order to carry out these often simple improvements.

As such, the Government has outlined plans to cap leasehold fees and crackdown on properties that qualify for the Help to Buy scheme. Some developers have voluntarily stopped the practice of selling on their leasehold to private companies but others have not.

Leaseholds

Generally, the term leasehold applies to flats with shared space. However, developers, particularly in the North West of England, have been selling houses on these terms, before selling the leases on.

Now, Communities Secretary Sajid Javid is pledging to try and solve these issues. Under the proposals, there will be a ban on new builds being sold as leaseholds, alongside ground rents being restricted to as low as zero.

Mr Javid noted that some buyers have faced, ‘unreasonable and long term financial abuse’

Leaseholds on new builds could be banned under new proposals

‘It’s clear that far too many new houses are being built and sold as leaseholds, exploiting home buyers with unfair agreements and spiralling ground rents. Enough is enough. These practices are unjust, unnecessary and need to stop. Our proposed changes will help make sure leasehold works in the best interests of home buyers now and in the future,’ he explained.[1]

The eight-week consultation process with new legislation is expected by the beginning of 2018.

Delighted

Beth Rudolf, Director of Delivery at The Conveyancing Association, observed: ‘We are delighted to see the Government responding to such a significant weight of evidence from leaseholders and stakeholders in the property industry, and producing proposals intended to prevent additional homeowners getting caught by escalating ground rents and unreasonable consent fees.’

‘We look forward to hearing more details on these proposals and hope they will deal with the single biggest loophole, the Commonhold and Leasehold Reform Act, which currently excludes leasehold homeowners from having any protection from unreasonable fees and unreasonable delays when buying, selling or simply improving their property,’ she added.[2]

[1] http://www.propertywire.com/news/uk/leaseholds-new-houses-england-banned/

Nationwide announces new measures to combat unfair leasehold terms

Published On: May 4, 2017 at 12:06 pm

Author: Em Morley

Categories: Finance News

Tags: ground rents,leaseholds,mortgages,Nationwide

The Nationwide Building Society has announced that it is to launch a new valuation policy for new build leasehold properties. This is aimed a protecting its mortgage members for suspect leasehold terms and spiralling ground rents.

As such, the Nationwide is the first large lender to impose more transparent lending conditions on these sorts of property.

Valuations

For valuation purposes for all new mortgage applications on new builds received from 11^th May 2017, the minimum acceptable lease term will be 125 years for flats and 250 years for houses.

What’s more, the maximum acceptable starting ground rent on all new build leasehold properties will be limited to 0.1% of the overall property value.

Terms of the agreement state that the ground rent must be reasonable at all times during the lease. Doubling of rent every five, ten or fifteen years will not be permitted without good reason.

Unfair leasehold terms and increasing rents have recently seen much media attention and political criticism.

Nationwide announces new measures to combat unfair leasehold terms

Safeguarding

Robert Stevens, Nationwide’s Head of Property Risk, Data and Strategy noted: ‘As a mutual building society that looks to protect its members, we have decided to make changes to the way we value new build properties on a leasehold basis. We are doing this to address the practice of using leasehold tenure where this is unnecessary, particularly for new build houses, and to ensure that onerous leasehold terms, including ground rents, are properly considered and controlled in order to safeguard our mortgage members.’[1]

‘Nationwide is taking a proactive, leading position on this issue to address a significant risk facing our members and to challenge what we believe to be poor practice in the new build market,’ he added.[1]

[1] http://www.propertyreporter.co.uk/property/nationwide-announce-new-measures-to-combat-unfair-leasehold-practices.html