Leasehold reform - more questions than answers?
Having had some time to digest yesterday’s news on leasehold reform, there is no doubt that the announcement raises a number of difficult questions which will only be answered as the changes play out.
We firmly believe that government paying attention to the problems inherent in the leasehold system is long overdue and that the 4.5 million flat owners around the country are deserving of the same consideration as freehold homeowners. A greater understanding of the difficulties and unfair costs that many leaseholders face is long overdue. However, as long as we have leasehold tenure, enfranchisement will be part of the equation and “simplifying” the process is complex and time consuming.
There is no commitment to a timeframe for the proposed reforms from government. So leaseholders will have little choice but to wait for any difficulties with the new arrangements to be ironed out. In the meantime, there is no doubt that the proposals will cause delays and uncertainties.
Two points on extending leases to 990 years. First, if your lease has more than 80 years to run there will be very little change in cost so why do it now? Current legislation is adequate here. On the flip side though, extensions on leases of less than 80 years should become significantly cheaper, at least in the short term.
On deferment rates, there is no certainty that they will necessarily change because of the proposed changes. Lessees’ surveyors are not going to just roll over and accept a change that wipes out the effect of the removal of marriage value payment. In contrast to the Government’s description of marriage value as a “prohibitive cost” we see it as a legitimate part of the deal. Why not share any extra value that is added between the parties? Any market evidence of sales transactions on properties with less than 80 years at higher prices will inevitably be used by landlords to justify higher premiums. So, rather than it being outlawed, we think it far more likely that over time any marriage value saving will be absorbed somehow.
Another big question will be who will set the rates for the new “simplified” system? Trying to make enfranchisement easier and more transparent is a an entirely admirable goal – but in reality the Government may in fact have set in train a number of complications that will only benefit property lawyers and keep the Tribunal busy for years to come.
Author : Maryanne Bowring
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