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leasehold reform

Reform would make leasehold simpler and cheaper

Reforming the leasehold system is essential to make it easier and cheaper for homeowners to buy the freehold on their property or extend their lease.

However, the Law Commission insists that any changes to the system of property tenure in England and Wales must be fair to both leaseholders and freeholders.

Around four million properties are leasehold, meaning the homeowners do not own the land on which their property stands.

Instead the land is leased from the freeholder or landowner for a specific period of time, usually decades or hundreds of years.

Demand for higher price

The issue of expense arises when the length of time the lease has left to run falls below 80 years. At this point lenders are unlikely to offer a mortgage on the property.

And the freeholder, to whom ownership of the property reverts when the lease runs out, can demand a higher premium to extend the lease or sell the land.

Many leasehold properties, particularly in London, are former local authority homes sold under Right to Buy. The freeholder in those cases is the local authority.

Campaign on leasehold reform

Campaigners have been demanding leasehold reform for years. In 2018, the Government asked the Law Commission to explore potential reforms and consult with interested parties.

In its most recent report, the Law Commission has set out three alternative options for reforming how leaseholders can extend their lease or buy the freehold.

It also suggests capping ground rents. These are paid annually to the freeholder and were pinpointed as an issue for new-build home buyers in 2018.

At the time it was revealed that developers were selling new-builds as leasehold, then selling the leaseholds on to independent management companies.

The leases included clauses that allowed for ground rents to double every year, adding a significant financial burden to homeowners and making some properties unsellable.

Options for reform

Professor Nick Hopkins, the property law commissioner, 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. We are ready to help the government in implementing whichever options for reform they choose.”

The Government is to consider the proposals before responding.

property affordability

Improvement in London property affordability

Falling house prices in London may not be music to the ears of home sellers, but they are making the capital’s property more affordable for buyers.

The latest analysis of the UK’s property market in the Hometrack Cities House Price Index says the gap between earnings and property prices has narrowed in London.

The Office for National Statistics works out affordability ratios by dividing house prices by gross annual earnings.

Affordability back at 2015 levels

In 2017, the price to earnings ratio was at a high of 14x. It’s now fallen to 12.7x today, which means an average property will cost a buyer 12.7 x their annual salary.

Hometrack says this 10 percent improvement in the price to earnings ratio takes property affordability in London back to a level last seen in June 2015.

The university cities of Oxford and Cambridge saw a similar drop in the price to earnings ratio, although Hometrack said house price growth elsewhere in the UK has remained broadly stable.

One big exception is Aberdeen where the price to earnings ratio has dropped by 30 percent since 2015.

More realistic pricing

Hometrack’s monthly report is predicting slow growth in house prices in 2020.

It noted: “While there are signs of firmer pricing in cities across southern England, we expect affordability pressures to limit the scale of price growth over 2020 across southern cities.

“We believe the headline, annual price growth in London will be 2 percent on the back of constrained supply and more realistic pricing.”

home buyers

Try-before-you-buy concept for home buyers

Try before you buy is a concept we’re all familiar with when choosing a car or finding a new outfit. But could it work for property?

A new online platform is aiming to give potential home buyers the chance to stay in a property before they commit to buying it.

Potential Pads will arrange for a buyer to “test-drive” the property to ensure they like it enough to go through with a purchase.

Staying overnight or for a weekend lets them check out the fixtures and fittings, scope out the neighbours, neighbourhood and schools and find out any pros and cons of the home itself.

Test-drive potential new home

The Daily Mail reports that Potential Pads works like a property-selling AirBnB, bringing together the sellers of high-value properties and those in the market for such a home.

Lynne Maplanka is the founder and director of Potential Pads. She told the Mail: “I thought to myself ‘if home buyers can pay to stay in a hotel, why wouldn’t they pay to test drive their future home?’.

“It is a platform that helps weed out the time-wasters and is an incentive that speeds up the selling process of a property, all the while making money for the seller before the property has to be sold.”

Future of property selling

She added: “We try on a dress before we buy it, test drive a car and even get to sample wine before purchasing the whole bottle at a restaurant.

“So why not try before you buy that future property? Most individuals will be parting with a lot of money.

“The concept may not be ideal for everyone, but we hope it will be the future of buying and selling property.”

asking prices

London property sellers sit tight through Brexit uncertainty

London sellers are squeezing the supply of homes for sale on the property market as they sit tight over Brexit.

Rightmove’s latest analysis of the capital’s housing market suggests a lack of supply has helped prices rise slightly in the last month.

In its monthly asking price index, the online estate agent listings site says the average asking price for a London home was £618,432, up 2.4 percent on the month.

However, there are a third (30 percent) fewer new sellers on the market this year compared to the same month a year ago.

Better options for sellers

Many would-be sellers are keeping one eye on the uncertainty over the UK’s exit from the European Union, which was expected to happen on October 31 but may now be delayed into the new year following political turmoil.

Miles Shipside, Rightmove director, said: “In a strange Brexit-induced paradox, thousands of potential sellers are holding back compared to this time a year ago.

“Ironically, this means that those who are coming to market have a better chance of selling.

“So, while some would-be sellers are being put off, it’s actually a good time to sell.”

Scarcity helping prices

Shipside added: “Those who are ignoring the Brexit disruption have less competition from stay-away sellers. And their prospective buyers have less negotiating power with a reduced choice of suitable alternatives.

“London has spent a few months in the price doldrums, but the scarcity of properties coming to market is now helping to underpin prices, and the number of sales agreed is higher than the same month a year ago.”

According to Rightmove, the usual autumn bounce in the UK-wide property market has been less pronounced than usual, with the number of sellers down 13.5 percent year on year.

How to avoid hidden costs in your conveyancing

Revealed: London’s most affordable spots for FTBs

As house prices stagnate and even fall in London, new research has revealed the capital’s most affordable spots for first-time buyers (FTBs).

According to data from the Office for National Statistics (ONS), overall property prices across London fell by 2.7 percent compared to 12 months ago with flat prices showing the sharpest drop of all at 4.3 percent.

Meanwhile, the Telegraph commissioned Savills Research and Zoopla to uncover the most affordable areas for FTBs in London.

East is best to buy

The research shows the average deposit is now more than £100,000 in the capital, and even with schemes such as Help to Buy, many newcomers to home ownership simply cannot afford to buy in London.

Savills and Zoopla looked at average incomes for 18-30-year-olds in each borough and compared those to the average price of a flat or terraced house locally.

The most affordable area is Beckton in the borough of Newham where the average price for a flat or terrace is £161,267. The average salary is just over £55,000 in Beckton.

Next most affordable is Island Gardens in Tower Hamlets. There the average salary among the younger demographic is £97,000, and that is reflected in the average price of a flat or terrace at £284,042.

Homes within reach

Chelsfield and Pratts Bottom in Bromley and Kenley in Croydon are also within reach of FTBs. Flats and terraces in these areas cost 3.25 times the average salaries for 18-30-year-olds – the Bromley average property price is £220,604 and in Croydon £201,770.

The research revealed that even in the more expensive boroughs, FTBs on higher-than-average salaries can still get on the property ladder.

For example, the North End ward in Hammersmith and Fulham has flats or terraces selling for an average £520,000, fives times the average salary for younger people.

High deposits required

Lawrence Bowles conducted the research for the Telegraph. He said: “As many young people in London share properties, rather than living by themselves, household incomes can be rather high.

“But that doesn’t mean those households can or want to buy together, which partly explains why many are still struggling to get on the property ladder.”

And Richard Donnell, head of research at Zoopla, said: “While affordability in London has improved, deposit levels remain over £100,000, making schemes such as Help to Buy London an attractive proposition.”

Former Milkybar factory to become new west London village

Nestlé's factory at Hayes, Middlesex

An iconic chocolate factory is to become the site of 1,386 homes in west London.

The Nestle’s factory at Hayes once made Milkybars but closed in 2015.

Now developers Barratt are reimagining the site as a new neighbourhood, retaining the factory’s Art Deco facades and entrance way while original features such as staircases and machinery will be incorporated into the new apartment blocks.

Iconic site

At its highest point of production in the 1950s, the Hayes factory employed more than 2,000 people, churning out the chocolate bar made famous by adverts featuring a cherubic blond cowboy and the iconic phrase “the Milkybars are on me”.

The new development will be close to a new Crossrail station that is expected to be open in 2020. It will include more than seven acres of green space and walking trails, while the existing canal towpath is to be upgraded. Workspace for small businesses will form part of the project.

Historic past

The original factory was established by Eugen Sandow, a strongman who made his fortune in early Hollywood starring in Charlie Chaplin films.

He retired in 1913 and set up the Sandow Cocoa Works. Nestle bought the factory from him in 1929, establishing its first production site outside of its native Switzerland.

The new Barratt site will be named Hayes Village.

Barnet scheme to deliver affordable homes in north-west London

London’s mayor has intervened and overturned a decision not to grant planning permission for a major development in the north-west of the capital.

Now the project will go ahead and deliver 844 new homes in Mill Hill, with 41 percent of those affordable.

Barnet Council had rejected the plans to redevelop the disused Pentavia Retail Park a year ago, citing that the scheme was over-development and did not provide enough affordable housing.

Positive intervention

Mayor Sadiq Khan then “called in” the planning application, which originally included 724 homes with only 35 percent of those affordable.

Since Mr Khan’s intervention, the developers have gone back to the drawing board, adding an extra 120 homes to their original plan. The level of affordable homes on the whole development has also risen to 41 percent and include some at social rent and London Living Rent levels.

The latest incarnation of the scheme now given the nod by Mr Khan will deliver more affordable homes than the whole of Barnet provided in 2017-18.

Significant number of homes

Mr Khan said: “This is the classic example of an underused site with the potential to deliver significant numbers of homes, including affordable homes at social rent and London Living Rent levels.

“It’s testament to the hard work of my planning team that, since I called this application in for further scrutiny, they have been able to increase the level of affordable housing even higher than it was previously.”

Flats smaller than a parking space the result of relaxed planning rules

Open Space 3 - 1st July 2010 -09- parking space

Plans for flats that would be smaller than a London cab could be given the go-ahead around the capital.

A report in The Times said developers are taking advantage of a relaxation in planning rules that allows offices to be converted into residential property.

Warehouse conversion

The report outlines how one project in Purley in south London was approved by council officials in Croydon. It involved turning a ground-floor office into two flats, one of 8.3 square metres (89 square feet) and the other of 9 square metres (97 square feet).

According to The Times, the minimum standard required for a parking space is 11.7 square metres.

The latest development is to convert warehouse and offices in Barnet, north London, into 107 flats with more than half of those not having any external windows. Instead 56 of the flats would look out on to an internal “atrium garden” with natural light coming from seven skylights in the roof.

Lacking basic necessities

The Times quoted Julia Park, head of housing research at Levitt Bernstein architects, describing the Barnet development as “more like a battery farm than a housing development”.

She said: “Space, daylight and ventilation are basic necessities and this is lacking in all three.”

The relaxation in planning rules mean that a typical studio apartment can be less than London’s legal minimum of 37 square metres where residents share amenities.

The Barnet scheme has not yet been given the green light. A local residents group has objected to the plan, calling it a “cynical exploitation of planning loopholes”.

Number of new homes registered in London on rise

The number of new homes registered in London has more than doubled this year.

New figures from the NHBC, which provides warranties and insurance for new homes across the UK, have revealed that more than 7,000 new homes were registered with it in London between March and May, a rise of 125 percent on the same period last year.

Increase in developments

Across the UK, more than 16,000 new homes were registered to be built in May, up 11 percent on 2018.

The NHBC said there has been new house building growth in eight out of 12 UK regions. London in particular is standing because a large number of new developments have started in 2019.

Encouraged by figures

Steve Wood, chief executive of the NHBC, said: “It is encouraging to see such strong figures in May.

“This has been helped by the increase in the private rental sector and the upturn in London, fuelled by inward investors as well as new developments from established players.

“Of course, we will be working with developers to maintain and improve the quality of the new homes.”

Leaseholders burdened by costs and worry

The cost of leasehold is more than simply financial for many homeowners, according to new research.

A survey by the National Association of Estate Agents (NAEA) has revealed that homeowners who own a leasehold property pay on average £319 every year on ground rent.

That means the domestic leasehold market in England and Wales amounts to some £447 million every year.

Affects quality of life

However, the financial costs are only one element of leasehold. One in 10 of those quizzed by the NAEA said paying for leasehold and worrying about rising costs affects their quality of life.

One in 10 had also seen their ground rent rising since they had moved into their home, usually within seven years of taking possession. One in five (19 percent) didn’t understand from their leasehold contract by how much their ground rent would rise.

And almost half (46 percent) told the survey they might not have bought their home if they had had any idea of the true costs of leasehold.

Investigation into mis-selling

The Government has promised to reform the leasehold system in England and Wales. Leasehold means a homeowner must pay rent on the land on which their property stands for a specific period of time to the landlord or freeholder.

The Competition and Markets Authority (CMA) has launched its own investigation into alleged mis-selling of leasehold properties with buyers claiming they face escalating ground rent charges and expensive fees that combine to make their property unsellable.

The investigation aims to discover if people are fully informed of how leasehold works and their obligations under the system, while also investigating claims of excessive fees and unfair contracts.

Emotional investment

Mark Hayward, chief executive of the NAEA, said: “Buying a home is one of the biggest financial and emotional investments we make in our lifetime, and once we’ve completed and moved in, we should be able to enjoy the property.

“But, unfortunately for those buying leasehold houses, the financial burdens continue, with ground rent payments to the freehold every year.

“Even though many leasehold contracts include a 10-year ground rent freeze, most developers sell the freehold on to a third party within a few years of completion, and those terms go out the window, meaning homeowners are faced with unexpected and escalating costs.

“It’s positive to see action being taken, with the recent announcement that the CMA will be investigating the mis-selling of leasehold properties, as for too long house builders and developers have not been transparent enough about what it actually means to buy a leasehold property.”