There has been a lot of news in the property market lately. The government is taking a lot of action, as well as abandoning a number of measures they previously proposed. Now, it is the turn of leasehold reform. It has been announced via the King’s speech that leasehold will be abolished for some properties and seriously reformed for others. If you are a property investor, or intend to become one, you need to fully understand these changes.
I highly recommend watching the full video (above) until the end, as it contains the exact details of the government's proposed leasehold reform. This information is essential for making buying decisions in the property market. In this article, I will explain: how leasehold property works; the problem with leasehold property; and the plans for leasehold reform.
1. Leasehold Property
A leasehold property is where you own the property, but not the land it sits on. It can be a house or an apartment. If you have a leasehold property, you will need to pay ground rent to the owner of the land. There are also often service charges in the case of apartments for the upkeep of communal areas. The lease is granted over a number of years and at the end of that term you have to pay to extend it, which is typically very costly.
2. Problems With Leasehold Property
There are a number of problems with leasehold properties. When a lease is close to ending, the value of the property drops considerably. If the purchaser knows they will be required to pay to renew the lease in a few years time, why would they pay full price? On the other hand, if you don’t want to sell the property, you will have to pay the high price of renewal yourself.
Service charges for apartments can be very high. Apartment owners have very little say over how the building is managed and how the service charge is spent. On top of this, there are often restrictions on how the apartment can be used or let out (which apartment owners also have little say over).
3. Leasehold Reform
The good news is that the government is bringing in major leasehold reform. They are abolishing leasehold for new houses and are reforming how leasehold works with apartments. This was announced in the King’s speech. The King said, “My Ministers will bring forward a bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold and tackling the exploitation of millions of homeowners through punitive service charges.”
The new rules will apply only to England and Wales. The measures will be set forth in The Leasehold and Freehold Reform Bill and include: making it cheaper to extend leaseholds; raising the standard term from 90 years to 990 years; and requiring transparency over service charges. You can read about all the proposed changes on page 45-47 of the King’s speech. These proposed changes will be good news for anyone with leasehold property, whether that be a house or an apartment. It also could potentially mean more freedom to use apartments for serviced accommodation, because apartment owners will have greater say regarding rules.
If you want to get into property and take advantage of proposed leasehold reform, why not book on to my next training event?
On the course, you will learn how to:
Become a property investor using other people’s money so that you can get started straight away
Utilise the 5 different types of raised finance so that you know exactly what to offer and when
Find the perfect properties for the BRR strategy
Recycle your money so that you can ‘rinse and repeat’
Build a power team you can trust, so that you can save time and money
And much more!
Tickets are only £1, and you can get yours here. If you are ready to take action, I hope to see you very soon!