If enacted in its current form, the recently published Leasehold and Freehold Reform Bill will affect landlords in England and Wales who own a leasehold property.
Extending a lease
The government’s intention is that the standard term given when extending a lease will be 990 years. The extension term for flats and apartments is currently 90 years.
The initial lease term for leasehold property could be just 99 years. For a new landlord, this might seem fine, but it is generally not a good idea to let a lease run down until there is less than 80 years remaining. Not only will it (currently) be more expensive to extend, but such a property could be difficult to sell or remortgage.
There are various other changes, with two of the more important being:
· The reduction of ground rent to a peppercorn (virtually zero) upon payment of a premium.
· The removal of the ‘marriage value’, which can make it more expensive to extend a lease where the lease term has run down. The marriage value reflects the additional market value of having a longer lease. Currently, there is only certainty of avoiding marriage value if a lease has more than 80 years to run.
Ground rent is of particular concern if it doubles every ten years or at more frequent intervals.
More detail will now be required when advertising property, regardless of whether it is let privately or via an agent. Many landlords and agents will already provide much of the mandatory information, but landlords letting privately might overlook such items as:
· Details of the property’s utilities, or lack of;
· Available parking;
· Issues with mobile coverage;
· Flood risk; and
· Accessibility facilities.
These new measures will now give prospective tenants as much information as possible prior to viewing.
A quick guide for landlords advertising a property can be found here.