Property Leaseholds Come Under Legal Scrutiny

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Outdated leasehold property laws are due for a change – but the lawyers ordered to find a way to make owning a home cheaper have not gone far enough, say critics.

The government asked the Law Commission to come up with a solution to leasehold problems for landlords and property buyers.

Leasehold home purchasers do not buy a property, only the right to live there for a defined time and pay ground rent to the freeholder for the privilege.

Unscrupulous builders have pushed the boundaries on leaseholds and raise the ground rent every few years – and in some cases the amount doubles every five years.

Buying a leasehold is also prohibitively expensive, while homes with less than 99 years left on a lease are difficult to mortgage and hard to sell.

4 million homes impacted

Around 4 million homes are owned as leaseholds and would be affected by the commission’s recommendations.

The cost of buying a leasehold is often determined by two figures –

  • How much the property value increases after the lease is bought out – termed the marriage value
  • The likely benefits the new freehold owner receives when buying the leasehold – termed the hope value

Instead of scrapping the current leasehold valuation process and starting again, the Law Commission recommends three ways forward and professes no preference for either.

Option one is do nothing, the second is scrap both the hope and marriage values, while the third is scrap one of them.

Property law commissioner Professor Nick Hopkins said: “We were asked to provide options for reform that save leaseholders money when buying their freehold or extending their lease, while ensuring that sufficient compensation is paid to landlords. This is what we’ve done.”

Britain’s biggest landlord licensing scheme scrapped

Councillors in Liverpool are considering a legal challenge against a decision by Housing Secretary Robert Jenrick to scrap the city’s landlord licensing scheme.

Cited as Britain’s biggest landlord licensing scheme [Adobe Reader file – opens in new window], Jenrick has failed to give permission to renew the scheme, which has run for five years.

He rejected the council’s renewal application on grounds that councillors failed to submit ‘robust evidence’ to show the scheme was working well.

“The decision will severely hamper attempts to drive up standards in the private rental sector and keep private tenants safe, particularly in relation to fire safety,” said a council spokesman.

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