Will banning new leasehold properties decimate the value of existing leasehold flats ?

user1977

itwasntme001 said:

If leasehold will be banned, it removes a large chunk of the profit margin for developers.  Surely this would mean less being built unless prices rise?

Is it that large a chunk? The developers manage to survive without it in Scotland.

eddddy

itwasntme001 said:

If leasehold will be banned, it removes a large chunk of the profit margin for developers.  Surely this would mean less being built unless prices rise?  Which means prices will rise in general?

I'm not sure that's the case.

It was (high) ground rents that made freeholds valuable.

The Leasehold Reform (Ground Rent) Act 2022 made it illegal for developers to charge ground rents greater than £0 for new flats.

As a result freeholds are now practically worthless.

So if anything, it would have been the abolition of ground rents which would have increased prices, not a change from leasehold to commonhold.

Section62

Bookworm105 said:

obviously if people can choose between leasehold and commonhold the property would need to be spectacular to justify being exposed to leasehold by choice.

so yes, prices will plummet.

If that does happen, it may only be until people realise the legislation has merely rearranged the deckchairs.  The common parts will still need to be maintained by someone, and if it isn't the bogeyman freeholder then it will be the other owners/occupiers of the block.  Whilst shared freeholds can work well, if the communal approach breaks down (as eddddy's example illustrates) then who will arbitrate and how will the (vulnerable) minority be protected? Answers on a postcard please.

Moreover, one of the lessons of Grenfell has been better understanding of the need for greater professionalism in building management - and that the people responsible for managing a building need to be held to account for their failings (i.e. jail time for serious wrongdoing).  Having been involved in building management and regulation from a LA perspective the only way you'd ever get me to be a director of a commonhold association is if all the important decisions were made on the basis of external professional advice, and as much liability (as allowed by law) was passed on to them.  It won't necessarily be cheaper that way...

It is an attractive proposition to get rid of greedy landlords... but replacing them with enthusiastic amateurs free to build their own cliques and empires won't necessarily improve the lot of people living in these buildings.

Hence presumptions about the effect on property values may ultimately prove to be very wrong.

ReadySteadyPop

Bookworm105 said:

obviously if people can choose between leasehold and commonhold the property would need to be spectacular to justify being exposed to leasehold by choice.

so yes, prices will plummet.

You would think so wouldn`t you?

ReadySteadyPop

daveyjp said:

The recent huge increases in service charges on some developments is already decimating the market for some developments.

Despite all my warnings (which aren't just confined to service charges), a relative is just buying his first home and has chosen an apartment on a new out of city centre development.  Sometimes experience and knowledge count for nothing.

Yes, a lot of this stuff will be unsellable, nothing lowers the value of a neighbourhood like loads of empty flats sitting around.

Beverley_Hillbillies

Forgive my ignorance, but I don't really understand a lot of this stuff 

My question is this,

We only have 49yrs left on the lease, we were thinking of maybe selling sometime this year, do we still need to renew our lease, estimated just over £20K, or, will the lease be terminated?

It's all very confusing  to me anyway 

itwasntme001

eddddy said:

itwasntme001 said:

If leasehold will be banned, it removes a large chunk of the profit margin for developers.  Surely this would mean less being built unless prices rise?  Which means prices will rise in general?

I'm not sure that's the case.

It was (high) ground rents that made freeholds valuable.

The Leasehold Reform (Ground Rent) Act 2022 made it illegal for developers to charge ground rents greater than £0 for new flats.

As a result freeholds are now practically worthless.

So if anything, it would have been the abolition of ground rents which would have increased prices, not a change from leasehold to commonhold.

Thats true that ground rents were the large factor.  But services charges are also a continual profit driver for the freeholders and I imagine moving to commonhold will put an end to this as well.

eddddy

Beverley_Hillbillies said:

Forgive my ignorance, but I don't really understand a lot of this stuff 

My question is this,

We only have 49yrs left on the lease, we were thinking of maybe selling sometime this year, do we still need to renew our lease, estimated just over £20K, or, will the lease be terminated?

It's all very confusing  to me anyway 

If you're asking something like...

• Instead of paying my freeholder £20k for a lease extension, will the change in law mean can I convert my leasehold flat to commonhold for free?

That would be equivalent to the government saying to your freeholder...

• We're changing the law which will instantly make you £20k poorer. (Or hundreds of thousands poorer, if you own the freeholds relating to many flats.)

Generally 'snatching money away form people' like that would be seen as breach of the freeholders' human rights.

However, I suppose that the government might still try to do it. But I suspect that the freeholders would challenge that in court. So the arguments might last a few years, before anything changes (if it changes).

bouicca21

Presumably it is going to take some time before the act is even drafted, let alone passed, then more time for solicitors and the courts to develop a body of expertise. So people like me and my fellow lessees and our management company who all agree our leases need to be varied, but have not yet hammered out the details, shouldn’t bother waiting.

ReadySteadyPop

Section62 said:

Bookworm105 said:

obviously if people can choose between leasehold and commonhold the property would need to be spectacular to justify being exposed to leasehold by choice.

so yes, prices will plummet.

If that does happen, it may only be until people realise the legislation has merely rearranged the deckchairs.  The common parts will still need to be maintained by someone, and if it isn't the bogeyman freeholder then it will be the other owners/occupiers of the block.  Whilst shared freeholds can work well, if the communal approach breaks down (as eddddy's example illustrates) then who will arbitrate and how will the (vulnerable) minority be protected? Answers on a postcard please.

Moreover, one of the lessons of Grenfell has been better understanding of the need for greater professionalism in building management - and that the people responsible for managing a building need to be held to account for their failings (i.e. jail time for serious wrongdoing).  Having been involved in building management and regulation from a LA perspective the only way you'd ever get me to be a director of a commonhold association is if all the important decisions were made on the basis of external professional advice, and as much liability (as allowed by law) was passed on to them.  It won't necessarily be cheaper that way...

It is an attractive proposition to get rid of greedy landlords... but replacing them with enthusiastic amateurs free to build their own cliques and empires won't necessarily improve the lot of people living in these buildings.

Hence presumptions about the effect on property values may ultimately prove to be very wrong.

Generally a property that involves hassle, expense or even perceived danger will be overlooked for a property that doesn`t raise these flags, I am on the side of values plummeting.