A property litigation expert has sent a stark warning to owners of leasehold properties. Shilpa Mathuradas, the head of property litigation at Osbornes Law, says recently-implemented leasehold legislation will make it harder to sell existing flats and houses with leasehold status. This is bad news for leaseholders, who already face a challenge when they need to sell property with a short lease.
The expert says the recent ban on ground rents attached to new leases – introduced at the end of June 2022 – will create a two-tier sellers’ market. At Open Property Group, we have to agree. If you weren’t aware of the new leasehold law, it states that buyers of leasehold properties where a new lease is taking effect - or where the property is brand new – will not have to pay a single penny of ground rent.
The new law does not apply to properties where an existing leasehold agreement is in place, so if you’re already paying ground rent, this will not change for now.
The two-tier system that Mathuradas refers to is already starting to develop. In practical terms, there are now new leasehold properties for sale where there is no ground rent to pay. These are pitted against similar properties for sale on the open market where the buyer will have to pay ground rent for the foreseeable future.
If you are a buyer, it’s a ‘no brainer’ situation – if you’re weighing up two similar properties in the same price bracket, purchasers will naturally choose the leasehold house or flat where there is zero ground rent to pay.
As well as pushing existing leasehold properties way down the pecking order, we expect the value of older leasehold properties to further diminish due to the annual ground rent bill buyers will have to pay. This only compounds the value that erodes every year a lease runs down.
If you own a leasehold property and are hoping the second stage of leasehold reforms - which would allow homeowners to extend their leases with zero ground rent for 990 years - would materialise quickly, you may be in for a wait.
Although Lord Greenhalgh, Minister of State at the Department for Levelling Up, Housing and Communities, said on the 13th June 2022 that the Government was committed to delivering the second part of its leasehold reforms during this parliament, this pledge is now in tatters.
Lord Greenhalgh has since resigned, along with the Prime Minister. To make matters worse, Housing Minister Stuart Andrew also tendered his resignation and the incumbent head of the Department for Levelling Up, Housing and Communities (DLUHC), Michael Gove, was sacked by Boris Johnson. With the Conservative party embroiled in the race for a new leader, and Parliament’s summer recess due to start on 21st July 2022, it really is a case of ‘don’t hold your breath’ when it comes to further, favourable leasehold reforms.
If you can’t wait for the Government to take further action and you need to sell a leasehold property you own, talk to us. Open Property Group will buy any type of leasehold property - a house, flat or maisonette – regardless of the lease type, how long the lease has to run and whatever the ground rent is. We can spare you entering the new two-tier property market and become your guaranteed cash buyer. Request your cash offer now and we can complete the purchase within seven working days.
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