Negotiating fee to renovate – Am I price Taker?

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I own a Leasehold apartment and would like to renovate, and have been proposed a fee by the Freeholder for overriding the restriction in the Lease If £20,000 plus legal costs.

This is before any cost of renovation.

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Rate rise most likely on hold

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Bank Rate:

The prospect of a Bank of England interest rate rise on August 2 had been growing over the past weeks, but now the chances of a rise have diminished. The change in outlook is as a result of low and steady inflation figures and slow wages growth.

The June 2018 figures just released by the Office for National Statistics (ONS) show that the consumer price index has remained unchanged or slightly down at 2.3% from the previous month, confounding expectations and warnings of a rate rise, following the first rise in 10 years in November last year from 025 to .05 per cent.

Despite rising petrol prices, and a sharp increase in the cost of gas and electricity, inflation remains low as clothing and other items, such as computer games, had their prices slashed in the summer sales. House prices across the UK have also been rising at their slowest pace for just under five years.

With the Bank of England’s inflation target set by government at 2%, just below the current level, slow growth in GDP over the first half of the year, thought to be down to the bad weather in the spring, and weak wages growth, pundits see little scope for a rate rise in August.

GDP growth in the three months to May recovered to 0.2 per cent from zero in the three months to April, in a sign that the sluggish start of the year was indeed weather-related, and economists are now forecasting 0.4 per cent growth for Q2. This view is supported by the purchasing managers’ index of private sector activity for Q2, pointing to better economic growth for the UK economy for the second half.

The services sector has picked-up and retail sales have also rebounded, with a 13 per cent rise in May, according to the ONS, so, depending where inflation goes from  here, if this continues we may expect a further rate rise in November.

ONS – Inflation and price indices to June 2018

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Blog: TNT – Tenure-neutral Time? 

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Could a change in legislation banish the concept of ‘them’ and ‘us’ when it comes to private and social landlords? RLA policy manager John Stewart on how the Government could make life easier for everyone.  When I meet with our members, whether at training events, forums or exhibitions and conferences, one question crops up in […]

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Blog: Section 24 and your next tax return

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RLA tax partner RITA4RENT has seen a huge increase in the number of calls on Section 24 – and how the changes to mortgage interest relief are reflected on self-assessment tax returns. Tax expert Michael Wright explains. Another tax year end passes, where has the year gone? Now April 5th has passed, landlords are now able to […]

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Landlord Law Conference Course 2018

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Special Offer:

A special training 50% discount offer for LandlordZONE® readers – ending tonight – 20 July at 11.30 pm

Law for landlords is getting trickier and trickier and landlords and their agents have to keep up.

Local Authorities are coming down harder too on things which a few years ago they might have let go.

100% compliance is the only way you can really be safe from prosecutions and penalties.  But how do you do that?

Well, a good start is to get the Landlord Law Conference Course 2018.  This has video recordings of all ten talks at the recent Landlord Law Conference (18 May 2018) along with the notes and power points plus audios you can download and listen to you in the car.

Talks include:

• Housing Barrister Robert Brown on avoiding problems with section 21
• Solicitor David Smith on problems with rent to rent and an HMO Update,
• David Cox CEO of ARLA Propertymark on letting agent regulation, and
• Mike Morgan from TDS (the Conference lead sponsors) on how to get the best results at deposit adjudications.

You get access to the course material for 12 months and can view the material as often as you like during that time.  The site is mobile responsive so you can watch all the videos on all devices, including your smart phone!

The course, which carries 5 hours CPD, is normally £150 but it is currently on offer at £75 (including VAT) – which is 50% off.

However this offer will close at 11.30 tonight, 20 July.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlord Law Conference Course 2018 | LandlordZONE.

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Which? report reflects RLA housing court call

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Consumer champion Which? has echoed the RLA’s call for a new housing court in a comprehensive report on PRS reform. The report ‘Reform of the private rental sector: the consumer view’, sees Which? call for a programme of reform ‘to bring the rental sector up to the standards required in the 21st Century’. The report […]

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HMO or What?

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I have been offered a building split into 10 self contained units, no sharing. Planning is for one property and council tax is one property.

Question is ‘what is it’?

I’ve a couple of standard HMOs so know what that entails

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Leasehold reform, good and bad for landlords

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Long Leasehold:

Landlords will find themselves on both sides of the divide if and when the proposed changes to leasehold laws* becomes a reality. A large number of buy-to-let landlords own flats and apartments in blocks under long leasehold and shared freehold ownership, while other landlords own the outright freeholds of the blocks for themselves.

In England and Wales leasehold ownership had been a dying form of tenure for newly built houses and flats, but in recent years it has returned with a vengeance. In 1996, just 22% of new-builds in the UK were sold as leasehold, but this has doubled to 43% today. In London, nine out of 10 new-builds are now leasehold.

The DCLG (now MHCLG) in 2017 estimated that, in 2014-15, there were 4.0 million leasehold dwellings in England in the private sector. Of these, 2.3 million dwellings (57%) were in the owner occupied sector and 1.7 million (43%) were privately owned and let in the private rented sector. There were 1.2 million leasehold houses in 2014-15 and 2.8 million leasehold flats. This represents 30% and 70% of the total number of leasehold dwellings respectively.

Following a spate of leasehold sales, which tied the leaseholders to extortionate increases in ground rents, some doubling every ten years, coming to light, the government instigated a review.

Proposed changes to flat ownership

The Law Commission has been looking into ways to make it easier and cheaper for owners of leasehold flats to buy their freeholds which have been outlined in a report.

The Law Commission’s proposals in­clude changing the way valuations are arrived at when extending leases and buying freeholds, away from the complicated formula currently used. The of this aim being to bring down prices, while still provid­ing landlords with fair compensation. It says this would also remove the requirement that leaseholders have owned their property for two years before making a claim.

The Commission also proposes to give leaseholders an additional right to buy unlimited exten­sions without a ground rent, for ex­ample, for periods of 125 or 250 years.

These new proposals come after ministers recently announced measures to ban the sale of new houses on a leasehold basis, and now this detailed study by the Law Commission. The aim is to give leaseholders more security of tenure and control over their own homes.

Law Commissioner Nick Hopkins says:

“Enfranchisement offers a route out of leasehold but the law is failing home­owners: it’s complex and expensive, and leads to unnecessary conflict, costs and delay.

“We’ve heard of untold stress caused to homeowners who have had to put their lives on hold because of issues with their leases.

“Clearly that’s not right, and our solu­tions for leasehold houses will provide a better deal for leaseholders and make sure the law works in the best interests of house owners.â€�

*About Long Leaseholds

The leasehold system of property ownership is something of a relic of English property law dating back to the 11th Century, mentioned in the Doomsday book of 1089. Freehold effectively means full, outright ownership of land (albeit ultimately, in theory at least, the state owns all of the land in the UK), whereas a leaseholder “owns� or leases for a limited period of time, for example 120 years.

In the middle ages land equated to power, and powerful families wanted to retain ownership of their land while maximising their earnings from it. The concept of leasing was established to allow tenants to work a plot of land, for a fixed period of time, on the basis that they would pay ‘in-kind’ by providing food and services to those further up the social order.

The system was to a large extent exported around the British Empire, but it’s only England that retains the purest form of leasehold, while legislation has been introduced over the years to tame to some extent the worst excesses of the owner’s power over their leaseholders.

The increase in construction of blocks of flats from the 1950s onwards resulted in increasing numbers of leaseholds, particularly in London. During that time leasehold was the only legal means available – before the introduction of Commonhold – to subdivide and sell properties in a multi-occupied buildings.

Commonhold, introduced by the 2002 Leaseold Reform Act, is a system of freehold tenure of a dwelling within a multi-occupancy building, but with shared responsibility for common services. It has never really taken off and freehold ownership cannot be applied to flats and apartments because current property law requires a separate freehold land boundary identifiable on a map.

Leases were originally sold on the basis that when the lease expired, ownership of the land and property reverted back to the landowner/freeholder. This resulted in a public outcry in the 1960s when some elderly leaseholders, many of whom had bought with no understanding of the legal process, were threatened with eviction.

This prompted legal changes to protect leaseholders. But with common issues such as excessive service charges, expensive and inadequate block management, reduction in value and the inability to re-mortgage and sell easily when the lease length reduces below around 80 years, means that many people are still very wary of purchasing leasehold property.

Even today, leasehold is by far the most common form of flat ownership and it’s still possible, though quite rare, for a lease to expire and a leaseholder to be evicted, with the property reverting back to the freeholder. A leaseholder would have bury its head in the sand for decades to allow that to happen.

Legislation introduced between 1967 and 2002 rebalanced the relationship between freeholder and leaseholder to some extent, allowing owners of leasehold flats and houses to extend their leases for an additional 90 years and benefit from other rights, providing they bought the extension following a prescribed formula.

It seems now that further leasehold reform may be on the cards following a spate of abuse by property developers selling off houses as leaseholds.

See Also:

Freehold, Shared Freehold or Leasehold?

Leasehold Advisory Service

Law Commission: Leasehold law set for radical reform

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Breaking: Five-year electrical checks to be compulsory for PRS landlords

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Landlords must have electrical installations in their rental homes checked every five years under new rules announced today. The new mandatory requirement for PRS landlords is one of a number of safety measures to be brought in by the Government, which has also launched a consultation into building regulations’ fire safety guidance. The Government has clarified the […]

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Prolonged heatwave puts properties at increased risk of subsidence

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Subsidence:

As Britain’s longest heatwave in five years continues, Hamilton Fraser, who provide specialist insurance services to the private rented sector, have issued a warning to landlords to ensure they have sufficient buildings insurance, as the shortage of rain puts properties at increased risk of subsidence. In extreme cases, such damage can result in houses being uninhabitable while repairs are being carried out.

Subsidence is the downward movement of the ground supporting the building. Typically, claims for subsidence increase over the warmer months as the lack of rain causes shrinkage of clay soils which expand and contract with changes in their moisture content. In 2017, 65% of subsidence claims to Hamilton Fraser were reported between May and October, despite having a wetter than average summer¹.

With June 2018 ranked within the top five driest on record in England and Wales (figures dating back to 1910²) and the hot weather looking set to continue into much of July and August, Hamilton Fraser is predicting a surge of claims over the next few months.

Modern properties are at less risk as they are normally built on deeper foundations, but Victorian and Edwardian homes, built on shallower foundations, are at greater risk. Trees near properties are often the cause of the worst problems as their roots absorb vast quantities of moisture, exasperating the shrinkage brought on by the dry weather.

Subsidence damage to buildings is most commonly identified by cracks in walls which are; visible from both inside and outside the property, tapered and extending below the damp proof course.

Eddie Hooker, CEO of Hamilton Fraser comments:

“Minor cracks often appear in properties for a number of reasons, and most of the time these are not related to subsidence and can be dealt with during routine maintenance. If your home is in a shrinkable clay area, cracks with widths up to 5mm can occur during unusually dry spells and can then be treated by redecoration when they have closed again after the normally wetter winter months. However, if the cracks do not close, or continue to open beyond widths of 5mm, it is likely there is a long-term problem and you should consult your insurance company immediately.�

¹ Met Office
² Met Office

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