Leaseholders in England and Wales could face significant changes if new legislation is announced as promised in the King’s Speech
Rachel Maclean MP, The Minister of State (Housing and Planning), has confirmed that plans to phase out leasehold will form part of the King’s Speech on 7 November.
The proposed law is expected to prevent any new houses being built as leaseholds, other than in exceptional circumstances, although new flats will continue to be leasehold.
In addition ground rents on existing leasehold properties may be cut to a peppercorn rate, and the Government has also committed to abolish ‘marriage value’.
Here’s what Clive Scrivener, our Founder Partner, was quoted as saying in This is money:
Who are the winners and losers from these potential changes?
Leaseholders can extend their lease for longer and pay no ground rent. However, whether they will have to buy out the existing rent remains to be seen.
Many leaseholders may have a share in the freehold companies so they may lose out too.
Leaseholders of flats with less than 80 years remaining will not pay marriage value. Short lease flats could suddenly be worth more, because the cost to extend the lease will be less.
Freeholders (companies and individuals) may lose out as they will lose an income stream if ground rents are capped at a peppercorn.
HMRC will also lose out. The tax takes from ground rent income and premiums payable from lease extension will reduce significantly.
Local authorities may also be set to lose out, as they are among the largest landlords in the country. They will have a big hole to fill on their balance sheets, which the Government and the taxpayer will have to plug.
Pension funds will also suffer, as many invest in freehold property and take an income from the ground rents leaseholders pay. If existing ground rents are reduced to a peppercorn, the ultimate losers in the future could be pensioners.
Another potential loser is the prospective buyer looking to access the market. First-time buyers can currently opt to buy a ‘cheap’ short lease flat, or a flat with a ‘high’ ground rent, to get a foot on the housing ladder. If you remove these option then this will mean even more aspiring homeowners might be priced out of the market.
This is money quoted members of the Association of Leasehold Enfranchisement Practitioners extensively. For once this important subject received the airtime it deserved: https://www.thisismoney.co.uk/money/mortgageshome/article-12693799/What-Governments-leasehold-reforms-Potential-rule-changes-mean.html
If you would like to discuss something related to a property valuation please contact Clive Scrivener direct via email at Clive@scrivenertibbatts.co.uk or call 020 8971 2983.