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Law Commission – Report on reducing price of lease extensions published.
Options

Tom99
Posts: 5,371 Forumite

[FONT=Tahoma, sans-serif]The Law Commission has published it’s report on reducing price payable when extending lease or buying freehold. The report and the summary can be downloaded from here:[/FONT]
[FONT=Tahoma, sans-serif]http://www.lawcom.gov.uk/project/leasehold-enfranchisement/[/FONT]
[FONT=Tahoma, sans-serif]The report does not recommend any one option but sets out three main options each with 7 sub-options for the Government to consider.[/FONT]
[FONT=Tahoma, sans-serif]Three main options:[/FONT]
[FONT=Tahoma, sans-serif]1 – Marriage Value shared 50/50 as existing law.[/FONT]
[FONT=Tahoma, sans-serif]2 – Marriage Value not paid by tenant therefore tenants with <80yr lease benefit.[/FONT]
[FONT=Tahoma, sans-serif]3 – Hope Value paid by tenant being less less than 50% of Marriage Value.[/FONT]
[FONT=Tahoma, sans-serif]The seven sub-options which could be applied to any of the above 3 main options:[/FONT]
[FONT=Tahoma, sans-serif]1 – Online calculator for premiums using prescribed rates for valuing ground rent and reversion.[/FONT]
[FONT=Tahoma, sans-serif]2 – Cap value of ground rent based on 0.1% of market value. For example if a flat is worth £250,000 with a new long lease then any ground rent above £250pa would be ignored.[/FONT]
[FONT=Tahoma, sans-serif]3 – No payment for development value. For example a block of flats has the potential to add additional floor to roof level.[/FONT]
[FONT=Tahoma, sans-serif]4 – Preferential rates for owner occupiers over investment owners.[/FONT]
[FONT=Tahoma, sans-serif]5 – Remove 80yr cap for sharing Marriage Value.[/FONT]
[FONT=Tahoma, sans-serif]6 – Remove discard of tenant’s improvements.[/FONT]
[FONT=Tahoma, sans-serif]7 – Remove discount for tenant holding over at end of term[/FONT]
[FONT=Tahoma, sans-serif]The following have been rejected as viable solutions and all the above options continue with the current valuation method of separately valuing the ground rent (term) and reversion:[/FONT]
[FONT=Tahoma, sans-serif]1 – Premium being just based of multiple of ground rent, for example 10x ground rent.[/FONT]
[FONT=Tahoma, sans-serif]2 – Premium being based of multiple of long lease value.[/FONT]
[FONT=Tahoma, sans-serif]There is a further report due in the spring covering the other aspects of enfranchisement.[/FONT]
[FONT=Tahoma, sans-serif]http://www.lawcom.gov.uk/project/leasehold-enfranchisement/[/FONT]
[FONT=Tahoma, sans-serif]The report does not recommend any one option but sets out three main options each with 7 sub-options for the Government to consider.[/FONT]
[FONT=Tahoma, sans-serif]Three main options:[/FONT]
[FONT=Tahoma, sans-serif]1 – Marriage Value shared 50/50 as existing law.[/FONT]
[FONT=Tahoma, sans-serif]2 – Marriage Value not paid by tenant therefore tenants with <80yr lease benefit.[/FONT]
[FONT=Tahoma, sans-serif]3 – Hope Value paid by tenant being less less than 50% of Marriage Value.[/FONT]
[FONT=Tahoma, sans-serif]The seven sub-options which could be applied to any of the above 3 main options:[/FONT]
[FONT=Tahoma, sans-serif]1 – Online calculator for premiums using prescribed rates for valuing ground rent and reversion.[/FONT]
[FONT=Tahoma, sans-serif]2 – Cap value of ground rent based on 0.1% of market value. For example if a flat is worth £250,000 with a new long lease then any ground rent above £250pa would be ignored.[/FONT]
[FONT=Tahoma, sans-serif]3 – No payment for development value. For example a block of flats has the potential to add additional floor to roof level.[/FONT]
[FONT=Tahoma, sans-serif]4 – Preferential rates for owner occupiers over investment owners.[/FONT]
[FONT=Tahoma, sans-serif]5 – Remove 80yr cap for sharing Marriage Value.[/FONT]
[FONT=Tahoma, sans-serif]6 – Remove discard of tenant’s improvements.[/FONT]
[FONT=Tahoma, sans-serif]7 – Remove discount for tenant holding over at end of term[/FONT]
[FONT=Tahoma, sans-serif]The following have been rejected as viable solutions and all the above options continue with the current valuation method of separately valuing the ground rent (term) and reversion:[/FONT]
[FONT=Tahoma, sans-serif]1 – Premium being just based of multiple of ground rent, for example 10x ground rent.[/FONT]
[FONT=Tahoma, sans-serif]2 – Premium being based of multiple of long lease value.[/FONT]
[FONT=Tahoma, sans-serif]There is a further report due in the spring covering the other aspects of enfranchisement.[/FONT]
0
Comments
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I think thousands of Leaseholders are going to be bitterly disappointed in this as it is just not going far enough. it seems that the Freeholders human rights to an income outweigh the leaseholders rights to own their homes unencumbered. I am sure they will wonder who these Human rights actually help other than criminals.0
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I think thousands of Leaseholders are going to be bitterly disappointed in this as it is just not going far enough. it seems that the Freeholders human rights to an income outweigh the leaseholders rights to own their homes unencumbered. I am sure they will wonder who these Human rights actually help other than criminals.
[FONT=Verdana, sans-serif]1 – Ignore marriage value. Marriage value is entirely created by the reduction in the leaseholders market value as the lease gets shorter, beyond what from a pure mathematical point of view should be the case. The freeholder does not contribute anything to marriage value, their interest will continue to increase year on year as the lease gets shorter.[/FONT]
[FONT=Verdana, sans-serif]2 – The online calculator at predetermined rates.[/FONT]
[FONT=Verdana, sans-serif]The next report will maybe cover things like the 2yr waiting period and costs.[/FONT]
[FONT=Verdana, sans-serif]With regard to costs if you have an online calculator to fix the premium then the freeholder surveyor/valuer costs could be reduced because the only variable would be the value of the new long lease.[/FONT]
[FONT=Verdana, sans-serif]The same goes for legal costs, a standard template could be specified which must be used.[/FONT]0 -
So what should we do in the meantime? Currently looking into extending my parents lease0
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Good points Tom
I am wondering if another angle is how much the Freeholder has already had from leaseholders retrospectively could be considered. If we are talking about Freeholder return on investment they may already have had strong returns.
I do appreciate that is hard to calculate though0
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