Leasehold properties - Are the government abolishing it??

JPmagic

Hi,

I wonder if anyone can share some light onto the government's plans and will it help me personally in my situation, I currently own a leasehold property and planning to move soon (with a 6 month baby we need to upsize) there are 75 years left on the lease and last year I enquired what would the fee be to extend to 90 years, I was told 20k!!.. forward to 6 months later I hear good news for  leaseholders and the government are trying to abolish it and these stupid fees. 

"Under the reforms, which were recommended by the Law Commission, both will be able to extend to up to 990 years with a ground rent at zero, and all new retirement properties will be sold without a ground rent.

Extending a lease comes at a cost, but the government said it would change the way these were calculated, including getting rid of costs such as the “marriage value”, which forces the leaseholder to share a potential profit from the extension with the freeholder."

Does this mean I would be able to sell my property with confidence that in time I will have an extended lease and I could sell it on this basis, or do I need to sell it at a price to reflect its only got 75 years left (basically will have to be a cash buyer as I've been told lenders wont be interested in a lease less than 80 years) 

Many thanks in advance 

Jamie 

davidmcn

JPmagic said:

Does this mean I would be able to sell my property with confidence 

It depends how confident you are that the government will actually follow through with a vague promise that at some point they'll introduce legislation to Parliament...even if they do, realistically it is likely to be years before anything comes into force.

NameUnavailable

The Govt aren't abolishing leasehold but they are talking about possible changes to the law. These talks have been going on for some time already, often stalled when the Minister changes.

If you weren't planning on selling I'd say hold on and see what transpires. If you want to sell now or anytime soon then you really ought to think about extending or either accepting a lower price (probably at auction) for someone to buy it as is and extend later.

princeofpounds

Hi Jamie, as the others have said, the government have announced a political intention to make some changes to leasehold law at some unspecified date in the future. Previous similar announcements have taken years to materialise as real action. Without going into too much speculation about what will eventually surface, I can say that it is almost certainly not going to involve the abolishment of leasehold.

One specific point relevant to you - when they talk about getting rid of marriage value, that does not mean you will not need to compensate the freeholder at all for a lease extension, it may well mean that they just move to a different system of compensation. The way it has been reported leaves that question open, and with political statements you have to pay attention to the precise language. There is a stated political goal to make things 'cheaper' for leaseholders but that could mean lots or little by the time we get there.

So no, the whole thing is largely irrelevant to your sales process as things stand.

The main reason I wanted to reply however was to point out that you seem to have a rather basic understanding of what is involved in extending your lease. In particular, be aware there are two methods. One is the informal route - your negotiate with the freeholder, agree a price (any price is possible), and process it. The other is the formal route - you apply to a Tribunal, the price and terms are defined by a formula with certain key inputs, and you process that. From what you say, it sounds like you may have just asked your freeholder what the price would be, and not seriously investigated what price you could achieve via Tribunal (or by using the threat of Tribunal as a negotiation tool).

Read this: https://www.lease-advice.org/advice/find-the-right-information-for-you/?step-option=61 and click on 'I want to extend the lease of my flat'.

It is probably worth extending if you want to sell, as your property is currently unmortgageable. My understanding is that a lease extension can often (if the timing and paperwork is correct) be arranged so that it is actually paid for by an incoming buyer and processed simultaneously with the transaction. So some of the proceeds will go to the freeholder rather than you, but you aren't restricted to cash buyers.

Finally - these are not really 'stupid' fees. People think they are, because they don't like paying money. But the freeholder is giving up (or being forced to give up) the right to take possession of the flat back in 75 years' time as was contractually agreed at the time the lease was granted. Why should they not receive some compensation for that? 

BernieW

A good answer from princeofpounds. I would also add ... the cost of extending by +990 years will be more than extending by +90 years ... although not 11 times more. The cost of the initial +90 will be more expensive than the next 900, as the additional 900 is further into the future and thus the 'present value' is less.
And regarding the penultimate paragraph from princeofpounds ... and the buyer paying for the extension started by the seller ... this is covered in a video I did some time back. "Bernie Wales short leases" might find it ... if that's not breaking the site rules here (I'm just trying to assist you).

TripleH

My thoughts on how the proposed laws will pan out is that there may be an end to rent being more than peppercorn (what that amount is who knows) and a limitation on how it increases ( ie. Not doubling every 10 years). Also a limitation on fees for seeking permission from the freeholder.
The rules are likely to define clearly what can be charged by a freeholder not end them. Also maybe offer some protection to limit the ability of freeholders to seize leasehold property.

BernieW

A peppercorn is a legal term used for £0.00. 

macman

I wouldn't hold out my hopes on any major reform in the near future. and, bear in mind, that if you delay the extension of the lease any longer, that opening offer of £20K is only going to increase as the remaining time left shortens. In 5 years time, £20K may look like an absolute bargain.