|
|
Post by mrclondon on Jul 30, 2017 13:06:21 GMT
One additional thought - much of the controversy in the media has been with regard to ground rents doubling every ten years, and this leaves the impression that RPI increases are perfectly OK.
If RPI averages 7.2% pa over the ten years, then the ground rent will still double (calc: 1.072 ^ 10 = 2.00 ). RPI of 7.2% pa is not high historically, and the "doubling of ground rents every ten years" was introduced as a simple measure to simplify the escalation calculation. (Although a doubling every 15 years is probably a better fit to more recent history corresponding to average RPI of 4.7% pa)
The issue is actually one of ground rents of more than the few quid per annum that can be justified to recoup the admin costs of the leasehold. It is that the government is looking to stamp out ... ignore the doubling vs RPI argument, it is a predominately a red herring.
|
|
registerme
Member of DD Central
Posts: 6,624 
Likes: 6,437
|
Post by registerme on Jul 30, 2017 23:22:46 GMT
He was however unable to offer any insight into the what the likely impact will be on current freehold investment portfolios (e.g. COL and MT loans), but said a stronger government would at this point legislate for the ability for leaseholders to purchase the freehold (or share thereof) at "affordable" prices, i.e. ignoring the daft ground rents which of course generate a daft present value of future ground rents. He thinks that the government will implement (quite quickly, certainly this year) an initial batch of changes via a statutory instrument. Any changes that need primary legislation (which is likely to be required for changes to existing leasehold agreements) are likely to end up in the 2022 manifesto, and will almost certainly be defered until after the brexit legislation. Some related commentary from a lawyer friend of mine (who isn't an expert in property law, still....):- With regard to the contract, this is wholly dependent on the terms of the contract. In essence binding in accordance with the legislation in place at the time of the crystallization of the contract. However, there could be some term in the contract which means that it will take account of changes in legislation. It could also depend on the legislation and its applicability. Both would need a quick review in conjunction with one another sadly. And:- Think simply that, dependent on the contracts and the legislation, if the effect is that one party is then in breach of the contract (and there is no caveat for this in the terms of the contract) then the non-defaulting party can sue for the loss. As I say the terms are set at the date of the contract. It could be that the legislation does not have retrospective effect and therefore would not apply to contract predating a certain date. I'm not sure that I am any the wiser.
|
|
registerme
Member of DD Central
Posts: 6,624
Likes: 6,437
|
Post by registerme on Jul 30, 2017 23:44:42 GMT
One thing I am interested in (and, I suspect ozboy will join me in this) is seeing how this is reflected in valuation reports. |
|
SteveT
Member of DD Central
Posts: 6,875
Likes: 7,924
|
Post by SteveT on Jul 31, 2017 7:34:01 GMT
I may be wrong (usually am) but I doubt the Gov will look to act retrospectively and, even if it did, I suspect anything would be very tightly defined (eg. new build houses only, bought direct from the builder within the last 5 years).
Property sale contracts are not like PPI; house buyers are advised by professional solicitors, who politicians might paint as scapegoats much more easily, and there may be "voters" on both sides of the transaction. Imagine the "photogenic Granny loses life savings" stories if the Gov arbitrarily limited long-standing ground rents, causing values of freehold portfolios to plummet and triggering calls for compensation of those who lose out as a result.
Just as the banks have been pilloried over PPI, it's the large house builders that will be targeted over ground rents.
|
|
ozboy
Member of DD Central
Mine's a Large One! (Snigger, snigger .......)
Posts: 3,168
Likes: 4,859
|
Post by ozboy on Jul 31, 2017 11:03:15 GMT
I may be wrong (usually am) but I doubt the Gov will look to act retrospectively and, even if it did, I suspect anything would be very tightly defined (eg. new build houses only, bought direct from the builder within the last 5 years). Property sale contracts are not like PPI; house buyers are advised by professional solicitors, who politicians might paint as scapegoats much more easily, and there may be "voters" on both sides of the transaction. Imagine the "photogenic Granny loses life savings" stories if the Gov arbitrarily limited long-standing ground rents, causing values of freehold portfolios to plummet and triggering calls for compensation of those who lose out as a result. Just as the banks have been pilloried over PPI, it's the large house builders that will be targeted over ground rents. Ah, those pesky "Professionals" again. Trust 'em at your peril.
|
|
jlend
Member of DD Central
Posts: 1,840
Likes: 1,465
|
Post by jlend on Jul 31, 2017 18:22:01 GMT
He was however unable to offer any insight into the what the likely impact will be on current freehold investment portfolios (e.g. COL and MT loans), but said a stronger government would at this point legislate for the ability for leaseholders to purchase the freehold (or share thereof) at "affordable" prices, i.e. ignoring the daft ground rents which of course generate a daft present value of future ground rents. He thinks that the government will implement (quite quickly, certainly this year) an initial batch of changes via a statutory instrument. Any changes that need primary legislation (which is likely to be required for changes to existing leasehold agreements) are likely to end up in the 2022 manifesto, and will almost certainly be defered until after the brexit legislation. Some related commentary from a lawyer friend of mine (who isn't an expert in property law, still....):- With regard to the contract, this is wholly dependent on the terms of the contract. In essence binding in accordance with the legislation in place at the time of the crystallization of the contract. However, there could be some term in the contract which means that it will take account of changes in legislation. It could also depend on the legislation and its applicability. Both would need a quick review in conjunction with one another sadly. And:- Think simply that, dependent on the contracts and the legislation, if the effect is that one party is then in breach of the contract (and there is no caveat for this in the terms of the contract) then the non-defaulting party can sue for the loss. As I say the terms are set at the date of the contract. It could be that the legislation does not have retrospective effect and therefore would not apply to contract predating a certain date. I'm not sure that I am any the wiser. There has been quite a bit of what might be called retrospective legislation in Scotland by the look of things - hence the recently announced consultation covers England "Legislation passed by the Scottish parliament, including the Abolition of Feudal Tenure (Scotland) Act 2000, and the Tenements (Scotland) Act 2004, effectively brought leasehold to an end in the country. More recently, the Long Leases (Scotland) Act 2012 automatically converted remaining long leases to outright ownership"
|
|
|
|
Post by mrclondon on Aug 7, 2017 18:05:40 GMT
For info - the developer Countryside Properties has bought back some of the 10-year doubling freeholds it sold on to give it the right to amend the escalation clause (to fairer terms). www.theguardian.com/money/2017/aug/07/breakthrough-in-leasehold-scandal-as-countryside-buys-back-freeholdsCountryside Properties, which sold some of the freeholds on its houses to the ground rent company E&J Estates, has agreed to buy a number of them back with a view to releasing homeowners from clauses where ground rents double every 10 years.
E&J Estates has also “resolved not to purchase any further leasehold houses” Which pretty much sounds the death knell of the market in the freehold of leashold houses. |
|
jlend
Member of DD Central
Posts: 1,840
Likes: 1,465
|
Post by jlend on Aug 9, 2017 19:59:04 GMT
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Aug 17, 2017 11:26:01 GMT
...If RPI averages 7.2% pa over the ten years, then the ground rent will still double (calc: 1.072 ^ 10 = 2.00 ). RPI of 7.2% pa is not high historically, and the "doubling of ground rents every ten years" was introduced as a simple measure to simplify the escalation calculation... Average RPI inflation of 7.2% pa is actually very high historically, if you have a long enough perspective. The graph below (updated from one I did for my retirement planning) shows that, as the "great inflation" of the long 1970s falls out of the figures, long-run RPI inflation is trending back toward the 2-3% range. It is derived from data in in the ONS publication "Consumer Price Inflation since 1750 - March 2004", updated to Dec 2016. webarchive.nationalarchives.gov.uk/20151013233246/http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/1750---2003/index.htmlPre the Brexit vote, my view was that the main risk was on the downside (deflation). Now I'm not quite so sure. 
|
|
|
|
Post by harryvederci on Dec 21, 2017 15:02:38 GMT
Ground rents set to zero on all new build flats, not just houses, plenty of media comment today...
...Ground rents will be outlawed on all newly built flats as the government went further than expected yesterday in a crackdown on unfair leasehold practices...
This might be a bit of a game changer for certain development loans across the platforms, not least the new MT Bradford pipeline one which immediately swipes £536k off the GDV
Will it affect student accomm?
|
|
|
|
Post by mrclondon on Dec 21, 2017 15:15:42 GMT
Thanks for the headsup harryvederci . Link to BBC coverage: www.bbc.co.uk/news/business-42439155Primary legislation is needed so projects nearing completion will probably be fine depending on how quickly the legislation passes through parliament, and no retrospective changes to existing leases have been announced. |
|
m2btj
Member of DD Central
Posts: 632
Likes: 773
|
Post by m2btj on Dec 21, 2017 17:50:23 GMT
Let's be clear, leaseholds banned on NEW-build houses.
Anyone buying a flat - or a house - on a lease of longer than 21 years will also not have to pay any ground rent. This legislation will be aimed at stopping NEW build developers selling the ground from under the householder. Bellway Homes (and others) were architects of this outrageous & unethical practice. Ground rents were sold to third parties as a commodity to maximise profits & the third party would then increase the ground rent to the householder. The average time for legislation to go through Parliament in England is approx 12 months. I can't see it being any quicker with the raft of Brexit legislation currently going through.
Poses some interesting questions for the world of P2P going forward.
|
|
registerme
Member of DD Central
Posts: 6,624
Likes: 6,437
|
Post by registerme on Dec 22, 2017 10:54:31 GMT
/semi off-topic
Last week my two neighbours and I each received a ground rent demand from the developers / owners of the site we live in. £150 / year, which isn't that unusual a sum for this kind of thing. What is unusual is that they had mistaken the freeholds we own for "long leaseholds", in spite of the fact that we haven't paid any ground rent for the last 13 years.
So yep, on the one hand a £450 bill for the three of us, on the other a potential ~£50,000 bill over the supposed lifetime of the supposed leaseholds.
Apparently it was a "mistake". Yeah, right.
|
|
ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,330
Likes: 11,549
|
Post by ilmoro on Dec 26, 2017 12:52:30 GMT
|
|
