Author: Antony Antoniou

Plans are afoot for millions of leaseholders in England to be given the right to extend their leases by 990 years while paying £0 ground rent, the Housing Secretary Robert Jenrick has announced in a move described as being one of ‘the biggest reforms to English property law for 40 years’.

The Government says the planned reforms – which are based on recommendations made by the Law Commission – are set to save leaseholders £1,000s if not £10,000s.

What’s Going to Change?

These latest changes (once brought into law) would mean both house and flat leaseholders will be able to extend their lease to last for 990 years with a ground rent of £zero.

A cap will also be introduced on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder. Furthermore, an online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease.

The government also plans to abolish ‘marriage value’ charges. Marriage value is the additional market value of a property when it has a longer lease. As the freeholder grants any lease extensions, any increase in the property value (from a lease extension) currently has to be shared equally between the freeholder and leaseholder. So, at the moment, leaseholders are under pressure to extend their lease before it falls below 80 years in length when they become liable to pay ‘marriage value’ on top of the costs of the lease extension as this can be costly with properties having shorter lease terms being harder to sell.

The Government is also proposing further measures to protect the elderly and retirees that will not only restrict ground rents to zero for new leases but also for leasehold properties built specifically for older people, so purchasers of these homes have the same rights as other homeowners.

Leaseholders will also be able to voluntarily agree to a restriction on the future development of their property to avoid paying ‘development value’, which is a premium usually placed on property leasehold or freehold values if the property in question has the potential to go up in value, for example by adding another floor, like a penthouse.

Housing Secretary Rt Hon Robert Jenrick MP said: “Across the country, people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive.

We want to reinforce the security that homeownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners.”

The Current Leasehold Rules

Under the current rules, leaseholders have to pay annual ground rents to the freeholder (or landlord) who owns the building that is being leased. Leaseholders may also have to pay maintenance fees, annual service charges and their share of the building’s insurance (if required under the lease agreement) as well as paying for any mortgage they might have taken out to purchase the lease on the property. Furthermore, as leaseholders don’t own the property outright, they often have to obtain permission from the freeholders to carry out major works.

The freeholder is usually responsible for the upkeep of the land the property sits on and the structure of the building (such as the roof and external walls) and sometimes the shared parts of the building such as lifts, stairways and communal gardens ­– and these costs can add up. So, they would argue that their current fees and ground rents are reasonable.

Ground rents are generally fixed for a certain number of years when the lease is purchased, meaning freeholders are then free to increase the ground rent following the fixed-rate period and this can lead to unexpected cost increases for the leaseholders. Higher ground rents can also make the lease less attractive to potential buyers if the leaseholder wants to sell up.

Leaseholders of flats currently have a lot more certainty than leaseholders of houses, as they can extend their lease at a zero ‘peppercorn’ ground rent as often as they like, but usually only for a period of 90 years while homeowner leaseholders have to pay ground rent and faced higher charges when trying to renew their leases, which can only be extended for 50 years, and only once. So, these proposed new changes will make a huge difference to leaseholders of houses.

Further Proposed Changes – Commonhold Ownership

The government also says it plans to introduce the commonhold ownership model, which is widely used around the world and allows homeowners to own their property on a freehold basis, giving them greater control over the costs of homeownership. Blocks are jointly owned and managed, meaning when someone buys a flat or a house, it is truly theirs and any decisions about its future are theirs too.

What Does All This Mean for Freeholders?

Of course, if all of the proposals come into force, property freeholders such as private landlords, housing associations, local authorities and developers could lose £millions.

In fact, investors who own shares in ground rent income funds have already seen falls in their share values on the back of this news.

Despite this fact, there doesn’t appear to be too much public response from freeholders since the announcement last week, but they are expected to fight many of these proposed changes. Steve Jones, Director of Valuation at Leasehold Valuers (part of the Leasehold Group) explains:

“We are concerned that the government’s commitment or ability to abolish “prohibitive costs like ‘marriage value’”, i.e., the additional amount paid to a freeholder when a lease falls below 80 years, is not explained in any detail. However, this will represent losses of billions of pounds worth of income for freeholders – and they are unlikely to give this up without a fight.”

“With the considerable loss of ground rent income for freeholders, it is only to be expected that they will somehow seek to claw back income from their investment portfolios in other ways, perhaps by influencing the algorithms agreed in the proposed online calculator, which is very likely to see deferment and capitalisation rates manipulated towards the favour of freeholders. This could have dire and unpredictable consequences for leaseholders and may even see the costs of lease extensions rise in future in some cases,” Jones added.

When Will These Proposed Changes Come into Force?

The Government says legislation to set future ground rents to zero will be brought forward in the upcoming session of Parliament. The timing for any further changes such as the introduction of Commonhold Ownership has not yet been set.

Are you a freeholder who will be affected by these proposed changes? Alternatively, do these changes make leasehold properties a more attractive property investment proposition? What are your thoughts?

One in seven London tenants are in arrears. Now pressure is growing for the Government to do more than delay evictions.

The Government is coming under increasing pressure to step in to assist London’s renters after figures showed that more than one in seven tenants in the capital have fallen behind on rent during the pandemic.

A study published today by Citizens Advice found that almost half (46 per cent) of London renters have lost income during the pandemic, compared with around a third UK-wide, and 15 per cent are now in rent arrears, compared with 11 per cent nationally. The number of private renters behind on their rent has also doubled since last February.

On average rent arrears stand at £720 but for more than half of those in arrears, a grant of just £600 would get them out of debt. Without help they could be evicted and find themselves homeless.

“The relentless financial and mental strain of arrears has a significant impact on renters’ wellbeing, making them less likely to self-isolate and more likely to experience mental health problems,” warned the report.

Campaigners agree that unless the Government grasps this particular nettle, things will only get worse.

Analysis by LSE and Trust For London predicts that the number of private renters falling into arrears could increase to 700,000 nationwide by November. Since the formal eviction process takes at least six months and courts have a backlog of cases, evictions could carry on long after the pandemic is over.

Those who don’t get evicted may find themselves back with parents or moving to cheaper homes, in what LSE describes as “overcrowded and insecure conditions”.

“We’re likely to see a slow burn of evictions that will go on at least into 2022,” said Christine Whitehead, LSE’s emeritus professor of housing economics. “This will leave tenants, and sometimes their landlords, facing months of insecurity, mental stress and hardship.”

The Government announced that bailiff action against renters would be paused during the current lockdown except in the most “egregious cases”, like antisocial behaviour or extreme arrears.

However, Alicia Kennedy, director of Generation Rent, warned that this would not keep renters safe from the spectre of eviction.

“Landlords can still serve notice and courts continue to hear cases, putting pressure on renters to move out before the bailiffs arrive.”

Generation Rent calculates that more than half a million households are in rent arrears because of the pandemic. What is needed, Kennedy said, is a package of financial support. “Without further support they will get deeper into debt and face homelessness.”

Ben Beadle, chief executive of the National Residential Landlords Association, criticised the Government’s current efforts on rent arrears, which can be summed up as a series of extensions to the eviction ban since last spring.

“Kicking the can down the road just means larger debts piling up, creating a bigger problem for tenants and also for landlords,” he said. “The Government needs to provide an urgent financial package to get rent debts built due to the pandemic paid off.”

Deputy housing mayor Tom Copley is another supporter of renters. “At every stage of the pandemic, ministers have treated renters as an afterthought,” he said.

“We need the Government to provide grants for people who have rent arrears, and to abolish no-fault eviction.”

Know your rights

If you are struggling to pay your rent, try talking to your landlord or letting agent. You may be able to negotiate an affordable repayment plan with them.

Although bailiff action is halted until at least the end of the current lockdown, landlords can still begin proceedings against tenants who are in “substantial” arrears.

In most cases, if your landlord wants you out they will have to give you at least six months’ notice before launching possession proceedings against you — and there is a large backlog of court cases so there is no need to panic immediately.

It is illegal for your landlord to bully or harass you. If yours is trying to force you out, hang on to any emails or other evidence and contact the police.

Seek help from your local council and advice agencies as soon as possible to sort out your living arrangements. Shelter and Citizens Advice have help on renters’ rights, while The Money Advice service can find you free, confidential debt advice if needed.

Rent arrears repayments are piling on the pressure

As a frontline key worker, the pandemic has been particularly tough on Rudolf Bozart — and not just because he works with vulnerable elderly people.

This time last year, life was looking good. Rudolf, 27, worked as an agency carer in nursing homes and private homes and was earning enough to pay his rent and live his life.

In spring, everything changed. Rudolf had just moved to a two-bedroom £700pcm flat in Colchester, Essex, when employers cut back on agency staff and his work, which was previously regular, evaporated.

Incredibly stressful: Rudolf’s landlord is anxious for him to repay his rent arrears but he can’t afford the extra monthly payments — nor can he afford to put down a deposit on a cheaper rental

In an “incredibly stressful” period — during which the only work he could find was making food deliveries on his bike — he racked up £2,000 in rent arrears, which his landlord is understandably anxious for him to repay.

“It is really, really difficult to manage things because carers are not getting paid enough,” Rudolf said. “At the end of every month it is a struggle.”

There is some good news for Rudolf, however. In October, he got a full-time job close to his home, which means he can pay his full rent.

But, with a take-home pay of £1,400, once his rent, bills (another £200pcm) and basic living costs are added, he doesn’t have much leeway to repay his arrears.

His landlord would like an extra £300pcm, which Rudolf said would leave him unable to buy food. He can’t move to a cheaper flat because he would need to pay three months’ rent upfront and, while he owes rent, his landlord would not repay the money he put down when he first moved in.

“I have had weeks of sleepless nights over this,” he said. “My work is already very stressful and I can’t afford to stress even more when I get home.

Massive monetary stimulus from central banks and governments stepping in with fiscal support have driven house prices higher around the world.

Covid-19 has pushed the global economy into the worst downturn since the Great Depression, says The Economist. During the 2008 crisis, real house prices fell by 10%, and similar pain was expected this time. Yet house prices in developed countries rose by 5% in the second quarter. In Germany, they were up by an annual 11% in August.

There are two main causes. Firstly, massive monetary stimulus from central banks has kept borrowing costs low. At the beginning of the year a 30-year fixed-rate mortgage in America carried a 3.7% annual interest rate. Today the rate is 2.9%.

Secondly, governments have stepped in with massive fiscal support. Thanks to furlough schemes and other measures, household disposable income in the G7 was “about $100bn higher” than “before the pandemic” in the second quarter. Elsewhere, such as in Spain and Japan, governments have suspended mortgage repayments and eased repayment terms respectively.

The boom is also being driven by a shortage of homes, says Nicole Friedman in The Wall Street Journal. In the US, the number of single-family homes for sale in July hit its lowest level for the month since records began in 1982. New home construction in the country has never regained its mid-2000s highs, and that structural problem is being aggravated by homeowners reluctant to move, owing to economic anxiety and fear of being infected with the virus by visiting buyers.

The most overpriced markets

Hong Kong remains the world’s most unaffordable major city. The latest UBS Global Real Estate Bubble Index, which monitors rent-to-income levels and “excessive lending”, reports that it would take 20 years for a skilled service worker in the city to save enough money to acquire a 650-square-foot apartment. The equivalent figure for London is about 15 years.

The average cost of a residential property in Hong Kong is a “staggering $1.23m”, notes Jason Hung in The Diplomat. Yet the city is becoming slightly more affordable as foreign investors pull back in response to the new national security law. Home rents fell by an annual 9.2% in August and commercial property has slipped by 30% over the past 12 months.

The UBS index shows that many European cities are overvalued, writes Diana Olick for CNBC. Munich and Frankfurt top the bubble list, while Paris and Amsterdam also look frothy. Beyond Europe, Toronto and Hong Kong are at risk of a real-estate bubble. London, Tokyo and New York are overvalued but not in bubble territory, while Chicago looks undervalued. Rents are falling in most cities, says Mark Haefele of UBS Global Wealth Management, so a “correction phase” for property prices in the world’s great metropolises could be looming.

Anaselia Beach Resort is a luxury resort in Cyprus– Ayia Napa that was established to cater to the locals as well as visitors and tourists and also to make profit as well. We will offer our customers the ultimate place for them to have fun and relax. Our location across 300 meters of waterfront property has afforded us a vantage point over our competitors as we are located close to some of the world’s famous beaches that attract locals and visitors alike. We intend to fully utilize our location to full advantage.

Anaselia Beach Resort is a major tourist destination that intends to offer its customers several services all aimed at generating fun and relaxation. We are strategically located in an area which we intend to maximize to our benefit. Even though our core service is to ensure that all our various customers can relax and have fun as well, we intend to ensure that we create other multiple sources of income that will also generate revenue for our business. Some of the services and products that we intend to offer at Anaselia Beach Resort are;

✓ Room rentals for private and corporate individuals

✓ Sales of drinks and food

✓ Facility rental for private and corporate events (Wedding venues – Ceremony- Party)

✓ Facility rental for Conferences and Business meetings

✓ Facilities for Spa and Fitness

✓ Training

Download the Anaselia Hotel Investment Overview HERE

For further details contact
Trellows Estate Agents
cyrpus@clever-gates.77-68-54-124.plesk.page