A ticking time bomb change in the law could affect the values of properties let out on long leases – and effectively blight the owner’s ability to sell, a lawyer has warned.
A Communities and Local Government consultation on the complex proposed changes ends on September 12.
If the proposal goes through, it would mean that a long leaseholder of a valuable property would have the right to remain in the property when the lease expires.
As the law stands, a long leaseholder may have a right to remain in the property as an assured tenant subject to the property being their only or principal home and satisfying a low rent test and value limit.
The current limit for rent is £25,000 and applies to any long lease with a premium value of approximately £400,000. The proposal is to increase the rent limit to £100,000, raising the value limit to over £1.15m.
Lawyer Elaine Dobson, a partner at Bircham Dyson Bell, said: “This would bring a huge swathe of properties under the value limits and deprive the landlord of the ability to deal with their freehold estate on the expiry of the long lease.”
She went on: “This is a dramatic increase and will result in many more long leaseholders enjoying security of tenure if brought in retrospectively from April 1, 1990.
“If the proposals are implemented retrospectively, this will mean a transfer of value from freeholders to leaseholders in respect of leases granted since 1990 which is over and above anything justified by inflation.
“However, it should be remembered that most long leases are granted for terms in excess of 99 years and as such, the effect of these increases will not be seen for some time.”
She warned: “If those value limits are increased, this will potentially bring an increased number of tenants within the qualification limits and deprive the landlord of thousands, and in some cases millions of pounds, of value, and there will be nothing the landlord can do about it.”
The consultation is here:
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Comments
Paul,
Exactly my point. Owners of leases still find themselves in difficult situations despite the reforms of the last government. Will anyone ever grasp this nettle? Marriage values continue to scupper sales and remain a burden. Add this to lenders criteria of 50 years at end of mortgage term and you get a whole raft of flat owners unable to sell and a whole rafy of buyers unable to buy, even if it is the perfect property for them.
Sure, whatever could be done will huert someones pocket, but who? When guns were invented it no doubt hurt people who had invested in crossbow manufacturing. That is the nature of a moving financial market. With a non rising market it has never been more important than now to look long and hard at leasehold legislation. No longer will rising property prices swallow up these hidden costs for buyers and sellers.
This can not end mortgage issues as there will from what I can see be a problem with ownership.
If there is no lease and the freehold is not in the occupiers name who will own what?
If a long leaseholder remains what is the interpretation of 'long leaseholder'? 3 years, 5 years, 10 years? Longer?
Answers please as I think this article just flicks over the top.
Has Grant Shapps been at it again? Looks like yet another of his ideas.
Would this be an end to mortgage issues and lease renewal fee issues on short leases?
Can this have any effect upon freehold management companies like SIMARC ? If it inhibits their business patterns i will be the first to applaud the changes.
So the friends and relations of those who are proposing this change pay rents up to £100,000 but not more than that?