Coming changes to “feudal” leasehold laws to favour flat owners

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Flat owners (leaseholders) only own their leasehold property for a fixed period of time and during that period they pay ground rent and service charges to the freeholder (landlord).

There’s always a long-lease agreement, a detailed legal tenancy agremeent between the leaseholder and the landlord which lays down conditions of ownership, occupancy ad the number of years the lease has to run. If the lease were to end, ownership of the property reverts to the landlord, but it’s rare for this to happen – under law reforms leaseholders have an automatic right to renew / extend their lease.

Most flats are leaseholds and are usually controlled and managed day0to-day by managing agents on behalf of the landlord. Houses can also be leasehold and they usually are if they’re bought through a shared ownership scheme.

Feudal history

The leasehold system is virtually unique to Britain and dates back to the 11th Century. It is a legal system designed so that wealthy families could keep wealth, and the income from that wealth (namely property), in the family or firm, passing down through the generations.

Reforms brought in in the 1920s were introduced to hold-down rents and restrict the rights of landlords to evict tenants.

In time landlords realised that they could raise money by selling long leases (typically 99/125 years) of their houses and flats and still retain ownership. It is the basis of the system we know today.

In more recent times builders / developers started to realise extra value from a development by selling flats and houses as leaseholds, charging ongoing ground rents, and then selling the leases on to investors. The problem was that the system started to be abused. They got greedy: they started them off with expensive ground rent charges that were in some cases set to double every 10 years, making payments rise exponentially over time. Unsuspecting young couples were often lulled into buying properties which became unsaleable due their long-term lease liabilities.

Leasehold Reform

There have been several leasehold reform Acts in more recent years. The Leasehold Reform Act 1967 (‘the 1967 Act’) gave leaseholders the right to acquire the freehold and any intermediate leases.

The Commonhold and Leasehold Reform Act 2002 introduced the concept of the commonhold, a new way of owning land similar to the Australian and American condominium, into England and Wales. Unfortunately, for one reason or another they were rarely taken up.

Other reforms included in the Act gave leaseholders of blocks of flats in England the right to take over the management of the block from their landlords, subject to complying with certain qualifying conditions. Other rules strengthened leaseholders’ rights against unreasonable charges and improved the way the Leasehold Valuation Tribunals (LVTs) worked to address disputes between leaseholders and landlords.

Recent abuses

Given the recent abuses of the leasehold system, these 2002 changes and the more recent changes proposed in the The Leasehold Reform (Ground Rent) Bill 2021-22, which seeks to restrict ground rents on newly created long leases of houses and flats to an annual peppercorn rent, are deemed not to go far enough. Michael Gove, the new levelling-up secretary, is said to be prioritising the ending of leasehold abuses, with further legislation planned in the next Queen’s Speech.

The current Bill having progressed through the House of Lords and Commons is due to enter its final stages soon.

Under the new law thousands of homeowners will get the power to buy their freehold. The plans would effectively phase out many leaseholds in England. Rules that prevent flat owners from buying the freehold to their property if a small part (25%) of their building is given over to commercial use, such as shops, a common configuration is cities, will go.

The new law will also make it easier for leaseholders in blocks of flats to take over management of their buildings, bringing them into common ownership in an attempt to avoid the extortionate management fees and ground rents which many leaseholders have been subjected to.

Property developers will be banned from charging ground rents on new-builds. The practice of developers selling off the freeholds to private equity companies, racking up charges to homeowners and trapping them in the properties, finally cooked the goose that laid the golden egg!

Michael Gove has said he is happy to be “taking on dukes and developers” who have made fortunes out of the system. Gove has been warned by some that he should not pick a fight with developers, companies the government needs to meet it’s housebuilding targets, but he has ignored these warnings. He’s already in the builders /developers bad books over the cladding payments they are likely to have to make.

The cladding scandal

Despite even these most recent reforms, critics say the system is still inherently unfair to homeowners who lease properties, and the cladding scandal has simply served to highlight their plight.

Thousands of flat leaseholders, many of them young couples or singles just starting out in life, are faced with extortionate charges for ongoing fire-watches and building safety, life-changing amounts of debt needed to rectify unsafe cladding, and they cannot sell.

Gove is said to want to phase out the leasehold system altogether. He wants to come up with a formula for establishing the value of freeholds and to take the responsibility off leaseholders to pay the legal fees of the freeholder. These plans are now out for consultation

Chief losers from these reforms if they do arrive will be the likes of the Queen and the Duke of Westminster, large landowners, along with many others who own large tracts of freeholds prime residential properties in the capital. Pension funds, holding many peoples’ pension savings, also have many millions invested in these residential portfolios tenanted by long leaseholders.

These reforms if they match the proposals will have the potential to bring about a fundamental shift in the way property is owned and managed in Britain, and particularly in the capital where the majority of the leaseholds reside, leading to a major re-balancing of wealth.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Coming changes to “feudal” leasehold laws to favour flat owners | LandlordZONE.

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National rogue landlord database hits ‘new high’ of just 61 names

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Four years after it was launched, the number on the Rogue Landlord database has only crept up to 61 out of the thousands claimed to be operating within the private rental sector, the latest government figures show.

Asked by opposition MP Gill Furniss to provide an update, Housing Minister Eddie Hughes revealed that of those 30 councils who have put landlords on the database, Camden had reported the highest number with 10 landlords, followed by Liverpool and Salford (four), Bournemouth, Hinkley & Bosworth, Telford & Wrekin and Walsall (three).

The database is designed to enable local authorities to target the most prolific offenders – those who have been convicted of banning order offences or have received at least two financial penalties within 12 months. It also aims to encourage joint working to tackle rogue landlords working across council divisions.

Funding gap

However, many councils lack the funds to chase up rogue or criminal landlords, or the resources to identify landlords who meet the criteria. It has led to many calls questioning whether the list is of any use, and has informed criticism of the government’s current plans to introduce a national landlord database.

According to The Times, the government is set to announce a new national register of landlords this week as part of its levelling up legislation, with plans to eject rogue operators.

At the time of the Rogue Landlord database launch in April 2018, ministers said there were approximately 10,500 rogue landlords operating within the private rental sector.

Housing campaigners claim the government has hugely underestimated the numbers involved and believe a model similar to the GLA landlord checker would be more practical as this shares information over neighbouring London boroughs.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – National rogue landlord database hits ‘new high’ of just 61 names | LandlordZONE.

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OFFICIAL: Action needed to woo back private landlords as stock dwindles alarmingly

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New landlords should be enticed into the sector as rental stock dips across the UK, says industry body Propertymark.

Its latest PRS report reveals that member agents had an average of just six properties that were empty and available for rent in each branch, while in London it was only four – a 71% drop from last December when the figure stood at 14.

The average number of new prospective tenants in December was the highest on record for the month, at 67 per branch; regionally, the West Midlands had the highest number with 106 and the lowest was in Wales where an average of 21 new prospective tenants registered last month.

The number of properties managed per member agent branch dropped from 212 in November to 204 in December, in line with the previous year. Humberside had the highest recorded number with an average of 313, while London – with an average of 131 properties managed per branch – had the lowest.

Propertymark reports that 56% of member agents reported rent prices increasing, which is an overall fall for the fourth consecutive month.

CEO Nathan Emerson (pictured) says as the private rented sector was under the microscope of policy makers last year and house prices boomed, some landlords decided to exit and consider other options.

“It’s important that new landlords are enticed into the market to provide much-needed homes,” he explains. “In particular, the London market has been uniquely affected by the pandemic with many people leaving the city as commuting routines relaxed.

“What we are seeing now is as people look to return to London, the landlords that were there before have left also. The lack of homes not only pushes up prices but puts more pressure on to social housing systems.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – OFFICIAL: Action needed to woo back private landlords as stock dwindles alarmingly | LandlordZONE.

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BREAKING: Renting reforms to be in this week’s ‘Levelling Up’ laws announcement

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Plans to force private landlords to join a national register and join a redress scheme have been rolled up into the government’s new ‘levelling up’ legislation to be announced on Wednesday which will include an aim to halve the number of poorly-rented homes by 2030.

Housing secretary Michael Gove (pictured) is set to announce the legislation this week that will include plans to see rogue landlords ejected from the database, according to a report in The Times.

The new law would also task landlords with bringing their properties up to a national standard, with about 800,000 forced to refit homes.

All private renters will also be given a right to redress for complaints. The English Housing Survey in 2019 estimated that 1.1 million properties in the sector did not meet the ‘decent homes standard’ and The Times reports that a source in the levelling-up department said 34% of homes in Yorkshire and Humber did not meet the standard compared to 17% in the South East.

Big changes

Gove is reportedly looking to bring the PRS in line with the social housing sector which could also mean introducing new measures on energy efficiency as well as a minimum standard of fixtures and fittings for furnished accommodation. Another shake-up for the PRS is due later this year in the upcoming Renters Reform White Paper.

The wider levelling-up policy to be announced on Wednesday includes plans to transform derelict sites in towns and city centres by creating new homes and jobs across England.

Wolverhampton and Sheffield will be the first of 20 places to get government support, as part of its £1.5 billion Brownfield Fund, in an initiative spearheaded by Homes England.

Meanwhile, its £1.5bn Levelling Up Home Building Fund will provide loans to small and medium-sized builders and developers to deliver 42,000 homes, and another £120 million worth of funding will be given to seven mayoral combined authorities to transform derelict brownfield sites and build thousands of new homes

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Renting reforms to be in this week’s ‘Levelling Up’ laws announcement | LandlordZONE.

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Top savings deals vanish

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The start of 2022 has seen some of the top rate deals vanish from the saving market, according to the latest analysis by Moneyfacts.co.uk. Indeed, since the start of January, both market-leading deals and several deals that placed in the top 10 have been withdrawn.

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Tricky lease situation/nightmare?

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Hi, I realise I need professional assistance for this, which I plan to do in the following weeks, but I am wondering if anyone has any advice.

– I bought a property with a short lease of 26 years remaining.

View Full Article: Tricky lease situation/nightmare?

Ending ground rents for new, qualifying long residential leasehold properties

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Leasehold reform in motion with the first groundbreaking leaseholder reforms becoming legislation, ending ground rents for new, qualifying long residential leasehold properties.

Independent Buying Agents, Haringtons, reflects on the long-requested need to transform leasehold agreements and what impact this will have on the property sector.

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Why are Ministers using cladding as another stick to beat landlords?

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Landlords have slammed the government’s leasehold reform plans as ‘riddled with confusion and unnecessary delays’ after it was revealed recently that landlords may be excluded from the latest cladding remediation fund.

That is the message NRLA chief Ben Beadle (main pic) is due to tell MPs when he is quizzed by a committee of MPs later today.

Beadle will also say how many landlords were shocked to discover that, while homeowners are to be given £4 billion to pay for cladding remediation on buildings between 11 and 18 metres high, the government has yet to reveal whether this will include landlords.

And yet, in a recent parliamentary answer, Secretary of State Michael Gove revealed that ‘accidental landlords’ who sublet properties because they cannot sell them due to dangerous cladding will be included in the Government’s scheme.

The NRLA is warning that the Government’s plans are not treating all leaseholders equally. In the process they also risk delaying remedial work on dangerous cladding as the Government seeks to understand who may be an accidental or a buy-to-let landlord.

Speaking ahead of his appearance before the Select Committee, Beadle says: “It makes no sense to be treating leaseholders who are landlords so differently to owner-occupiers.

“Both groups have faced the same problems, and both should be treated equally. We are calling on the Government to rectify this injustice as a matter of urgency.”

Case in point

As part of its campaign, the NRLA has highlighted the case of landlord Ian Davies in Cardiff, who for the past six years has rented out a flat on the fifth floor of a six-storey building to bolster his pension.

He recently found out that the building is covered with flammable timber cladding panels and the whole block has compartmentation issues.

As a result, the six-monthly management fee he pays has increased from £700 to £3,000, completely outweighing his rental income, and now he has ‘serious concerns’ about the lack of support for residential landlords along with the rising costs of service charges and waking watch expenses.

Beadle is due to speak at 5pm and will be joined by Liam Spender from UK Cladding Action Group and Andrew Bulmer, CEO at Institute of Residential Property Management.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Why are Ministers using cladding as another stick to beat landlords? | LandlordZONE.

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Happy Tax Day – BUT NOT FOR ALL

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If you are a private (unincorporated) landlord, today is the last day to pay your tax on your rental profits for the 2020/21 tax year without incurring penalties.

Were you shocked at how much tax you paid?

Below is an example of a private rental business owner who consulted us last year.

View Full Article: Happy Tax Day – BUT NOT FOR ALL