Category: Editorial

Every year there is always this discussion that whether property is a viable investment compared to other investable assets. The main stream media and the naysayers will always continue to warn you off the idea of investing in property. Amongst the negativity of the main stream media there are still a couple of compelling reasons why property investment remains in the long term a safe and secure asset class to invest your money.

Firstly rents are linked to wages the amount a person earns will determine what they will pay in rent. Wages generally tend to rise with inflation although not so much recently but in the long term we envisage wages to rise. Consequently if wages rise then people’s standard of living will increase which will consequently allow investors to increase rents in-line with the increase in wages.  Although this may not be happening at the present time; property particularly standard BTLs or HMOs are generally seen as a long term investment. Therefore you are looking at correlations in 10 year periods. It is safe to suggest that in that 10 year window wages would increase in line with inflation. If you are making £500 in rental income now in 10-20 years time you will be making an inflation adjusted income equivalent to £500. In other words your spending power remains exactly the same and there are not many other investments that will do that.

Secondly leverage is another major factor for intriguing investors to continue investing in property. In property this performs well in an inflationary economy. For instance you borrow £75,000 for a property that is at a purchase price of £100,000. For the 25 year mortgage term inflation runs at 2% and the house grows in line with inflation and in 25 years it is worth a £164,000. Meanwhile your debt stays at £75,000 if properly leveraged. Therefore property performs well and so do other asset classes such as gold and silver however the other asset classes do not provide an income. Banks are currently willing to lend money and with all this in mind it is a great time to leverage provided you do so sensibly. On the other hand, it is clear that with wages staying stagnant there is little room for rents to rise and the government is being very stringent with investors and property prices are at a peak with nowhere to go although these are not permanent positions and they will change so long as we are in an inflationary market the benefits will remain even if we have a period of deflation. Such a period will be a temporary downwards spike and then it will bounce back and increase thereafter.

Although a lot of people have opinions of property and it being seen as negative keeping a long term view on things is good. If you allow doom and gloom merchants to hold you back you will miss out the unique opportunities that property investing can provide.

Conclusively there are of course disadvantages and despite the government’s heavy hand with investors and landlords it should still be considered as a good long term investment strategy that provides value to an investor in different forms whether that is through regular income or capital growth the benefits are apparent.

Today we will be discussing the differences between freehold and leasehold properties where either of the two could be on the market. Most common tends to be freehold properties. Freehold properties just means the ability to sell the property at will at any point. Essentially what you own as a freehold property is everything which includes the land, bricks and mortar on it and you are absolutely free to do with it as you will as long as it complies with government regulations. The second form of ownership tends to be leasehold with flats it can also indeed be houses. Generally it involves the administration and ensuring that a block of apartments are run well. If for instance you had a building where you had a ground floor flat and a first floor flat both have the benefit of the foundations of the building and the roof to keep it sheltered and you need some kind of administration system set up so that the ground floor flat does not have the control of the roof and is reliant on the maintenance and the first floor flat does not have control of the foundations so they are reliant on the administration to ensure that it remains stable and repairs would be undertaken.

You also need to ensure the building is insured in case of a disaster and therefore leaseholds were set up so that there are restrictions to do with what the occupiers are and are not able to do which can include a pet, as well as not doing anything illegal or immoral. Or for instance if there is a balcony not hanging out your washing there as it may look unsightly may be another common restriction. Another restriction is ground rent which is generally some form of money paid annually however it is not always money and you may often hear the term peppercorn ground rent which means the ground rent is paid in the form of a single peppercorn. Such a term does not have any monetary value but it makes the lease valid. The second point of difference is within a leasehold your likely to have to pay a maintenance and service charge as there may be common areas to the building such as external decoration, garden areas a common hall way that needs to be cleaned and insured and the maintenance and service charge covers such items.

If you are a buyer looking at leasehold property it is wise if the information is not immediately apparent ask the estate agent how much the ground rent is, how much is the maintenance and service charge. Additionally it is also wise to ascertain and ask the estate agent what is the length of the lease because it will be for a fixed term typically the shortest leases start off with 99 years and the longest is 999 years however years will runaway and it could be a lower term and you need to ask those questions. Once you have obtained this information you should take some advice as there are a number of people you can ask such as the estate agent, your solicitor and your mortgage advisor if you are unsure about any of those aspects. With all those points hopefully that provides you a better insight into what the difference is between freehold and leasehold.

There are many different skills you need in order to be a good developer and below we have listed 5 tips on helping you making your way there. They are important points to note when considering a property development opportunity.

1. Always work backwards from the Gross Development Value when calculating the purchase price.

It is the most appropriate way to work out what you should be paying for the site or piece of land on offer.  You need to be realistic about this Gross Development Value and it is recommended to be a little bit pessimistic when calculating this figure. The reason for this is because if you over inflate the price then you would be consequently over pricing the purchase price for the site/land. Therefore always be realistic in your GDV and not hopeful as this would allow you to work out your costs and profit margin realistically.

2. Just because a property does need refurbishing it DOESN’T mean it makes it a good deal

If you spot a property that appears to be £20,000 below market value if you think you will spend £30,000 undertaking the refurbishment then that I am afraid is not a deal! Unless you can add some real tangible value in some other way for instance say building in the back garden I would suggest you should be looking for another project. Just because a plot has planning it does not guarantee you a profit or that the property can even be developed at all for that matter. Obviously you need to undertake your research carefully and dare I say if the agent is offering up some fairly persuasive numbers for example the Gross Development Value keep in mind the agent makes a commission if you buy and therefore you should put more faith in your own numbers rather than the agents.

3. Always have a schedule of Works for the Project

If you do not know what you want how would the builder know what you want and how can you possibly have a realistic budget and quantify your costs and margin. You cannot build from planning drawings it is therefore impossible for the builders to actually price the build from them. You would need to request your architect to produce building regulatatory drawings before you go and get any prices. This is an extra step but an important one as this would allow the builder to then provide you with a more accurate quote for the works to be undertaken and at the quality you envisage.

4. Do not be afraid to outsource to experts

By outsourcing to experts as the project is progressing it will save you £1000s in the long term. In essence if you tried to make the project into a DIY job you will end up arranging for experts to come in and undertake the work after you make a mess of it as you would find firstly you did not end up obtaining a high quality finish and secondly you took a lot longer which would consequently affect your profits. Therefore as much as we would like to think we are experts we should understand that it is better for us to get the real experts in to undertake the work.

5. You do not have to appoint the cheapest builder

You do not have to necessarily appoint the cheapest builder it is important to appoint the best builder. On any one project you can only achieve two of the following three items you can get (i) high quality, (ii) fast turnaround or (iii) low cost. In essence you should aim for high quality along with fast turnaround if you possibly can. As a low cost will probably cause you to spend more in the long term as they may necessarily not have undertaken the job properly or if you decide to rent out after developing there may be further repairs later down the line. Always consider your options. Please keep in mind that delaying the project whilst trying to beat down the price can cost you more in the longer term than what you are trying to save. Delays tend to swallow up your profits as the financing costs on any given project are generally quite high. Always agree terms with your builder before the work starts and write them down for both parties to keep a record of and on larger projects do not be afraid to use a formal contract to set out the schedule of works and timescales.

6. Is project managing the works really the best use of your time and skills?

Or may your time be better spent going out and looking for that next deal. In essence if you ensure you have a trusted team and you have clear instructions and outlines in place for your builder you would not necessarily need to spend too much time project managing. Provided you are clear with your team and obtain and view on a consistent basis you can effectively use your time to find your next project. Remember your money is made when you buy your property/land not when you sale!

Today we will be discussing the points to consider when purchasing property in the UK with regards to market conditions and basic principles that should be undertaken before investing. There is of course some uncertainty because of Brexit and different laws being enforced along with tax laws that have also been put in place for investors. Therefore consequently do not expect a huge boom in the market or crash at this present time however it is good to understand what is exactly going on. As landlords/investors are beginning to feel the squeeze from a number of different areas such mortgage costs not being considered as an expense any longer. Also for instance last year according to Estate Agency Countrywide landlords bought 12.5% of homes sold in the UK which is a 9 year low compared to 14.7% in 2016 and 16.3% in 2015. Hence we are seeing a number of landlords starting to offload their entire portfolio and landlords are starting to try to purchase property in cash.  Whilst investing in the UK it is important we ascertain what the picture of the market is currently.

1. Prior to doing anything ensure you have done research, not to the extent where it is really in-depth. But you need to do enough research where you are confident about the area and location and so you are able to take some steps forward in terms of purchasing property in the area you have chosen. This will also allow you to be aware of what you can expect in terms of rental yield, capital growth etc after a few years. This will all need to be taken into account when considering the property you decide to purchase.

2. Always consider the banks patterns and ascertain whether interest rates are likely to increase. As this is something that is expected to continue because if interest rates continue to increase then landlords are not able to take it into account as an expense and it will continue to increase which consequently will affect profit margin. So ensure that you consider this aspect as consequently you do not want a tight margin otherwise you may get into issues later down the road. You can either purchase with cash or reduce the leverage that you have by paying off your mortgage.

3. In a number of locations in the UK there are comparable properties within a one square mile radius where prices are going up, down or were completely flat. So as we are aware price growth is slowing in areas such as London amongst other areas in the UK which proves to be an uncertain period for Britain’s economy. However with the uncertainty of Brexit and the economy currently for professional investors these are precisely the conditions in which such investors find opportunities to strike good deals. Regardless of their being a mixed picture across the property market. The number of housing transactions has been stuck at the same level for four years which is said to be approximately 1.2million per year. However in Prime London areas transactions have been down by 20% over four years.

Therefore if you understand the market and how to utilise a minimum amount of leverage as a professional property investor you can take advantage of the market conditions. However this would of course require a high level of understanding, and ability to spot the locations where there still is capital growth and a clear strategy of the further implications and regulations that have been imposed on investors.

A property that is classified as a House in Multiple Occupation (“HMO”) is generally defined as a property which is let by three or more tenants who are un-related. The exact stipulations vary from council to council but generally the consensus is very similar. Many landlords see this as an excellent way of obtaining a high yielding investment and consequently being able to obtain a high return on investment as you are able to collect rent from a higher number of tenants. However as a landlord/investor you have to ensure that the location and the property itself are right as that will decide whether it would be a successful HMO or not. As a strategy having a HMO is a good product as you are giving your tenants an alternative to renting an entire house or apartment. Allowing them to utilise their other income on leisure or saving a deposit to buy their own property.

1. Speak with your council

There are national standards and regulations that have to be adhered to across the country with HMOs however some councils are different in terms of their definitions of what is a HMO and it is recommended to always speak with your council and in particular your HMO officer. Generally you would be required to obtain a license if your property is let to five or more tenants from more than one household, is at least three storeys high and the tenants share a toilet, bathroom or kitchen facilities. Speaking with the HMO officer will allow you to ascertain what the requirements are, and obtain advice if you have a particular property in mind that you are deciding to purchase. The HMO officer can indeed provide some good advice in terms of layout and what you could potentially do. If you build this relationship from the start you will find that obtaining the license would be more comfortable as you are keeping the council in the loop and know you are very much meeting compliance with the property being considered as a HMO.

2. Planning Permission

Depending on how much work will be required in converting the property into a HMO you may need planning permission to carry out the changes. This may be based on your area as a number of areas are having Article 4 directions put in place which in essence means if you intend to change the use of the property from a single dwelling then you would need to seek permission in order to do so.

3. Consider your target tenants

As you have now undertaken your background research in terms of speaking with your council and seeing whether you require planning you need to now consider what your tenants are going to need and how much space they will require in addition to the furniture that would be required and the level of appliances you are considering to instil.

4. The layout

It is likely you will be converting the use of some of the rooms. For instance spare rooms may potentially be converted to additional bathrooms and reception rooms to additional bedrooms. You may also potentially need to move or construct walls in order to alter room sizes –  these are all aspects you will need to consider carefully before undertaking. For instance you would look to convert the reception rooms but this is not always the right approach. In the ideal scenario you would have two reception rooms one of which you can convert into a bedroom and the other can remain as a communal area.

5. Void Periods

A difference between a HMO and a standard single dwelling is you are likely to have a higher turnover of tenants. Therefore it is advisable to put aside at least two months worth of rent each year to cover potential void periods. So ensure you are prepared for potential unoccupancy and have a system in place to keep yourself secure and not to overstretch yourself.

In essence you need to ensure you have a good plan and overview of what you intend to do with the property whilst ensuring you have a good relationship with the HMO Officer so you are aware of the regulations and stipulations enforce in your area.

There are many different strategies out there to increase your cashflow and portfolio. However the first decision you would have to consider is the angle i.e. strategy you will embark on within property. For instance you may want to purchase a property that requires renovation with the objective of renovating and either letting it out or reselling it for a profit. This would require ensuring that you are aware of the market value and then purchasing at significantly below market value to ensure you have enough for the costs of the renovation and your profit margin. However one of the first pointers that property investors are provided with initially is to consider buy to let.

Buy to let property is where you purchase a property but you have the intention of renting the property out. This is a great option as depending on the value of the property you will not need a considerable deposit and also it would not require much management as there will just be a single tenant or family living at the property. Therefore from a managerial perspective it would not be too demanding. If you are currently considering how to invest in property do not ignore this option. Although this is not the best option for achieving a high level of cash flow you can slowly build your portfolio on this. You have to also take into account that a benefit of such a strategy is that there is also not a high level of management required in comparison to running a HMO. So if you are starting out or are currently in the process of building your portfolio never ignore this particular strategy.

During recent times there have been tax implications and other regulations that have made it more difficult to purchase property in the UK. However if you have the right structure and system in place you are able to still utilise property as a good income stream. As the demand for UK property particularly rental is still high despite Brexit, the need for high quality rental accommodation is ensuring a steady stream of tenants. The rental returns particularly if you have utilised finance for your purchase is not as high as what you would achieve if it was a HMO but you also need to take into account the potential capital appreciation return you will achieve. Therefore if you are looking for just cashflow you can purchase cheaper properties in areas where there is unlikely to be much capital appreciation that achieve a high yield of 15+%. However if you are looking to achieve capital appreciation as well as cash flow you need to ensure you purchase a property in the right location. This is where you see from your market research that in the next 5-10 years prices are likely to appreciate in that particular area.

Remember the number of people in the UK living in rental accommodation is higher than ever, with major increases in the last few years. Therefore utilise this to your advantage and do not overlook this simple strategy of buy to let with all the other great strategies as well. Ensure you diversify in order to minimise your risk.

It appears we are slowly getting towards some sort of “normality”. Note I did not use the word “back”. The reason being is because it is most likely going to be a new form of “normality” going forward rather than what we are use to. As currently pubs, restaurants and some offices are still yet to open where does this leave the sphere of property development. As the government have announced an easing on the Housing Market to allow for viewings to take place is that a good sign for property developers? Of course it is but the ramification of the period we have been through has either gone two ways for a business either you were able to steady your ship and get through it or you have been overwhelmed and over leveraged so would have had to offset assets.

This issue arrived during a period of faltering global growth, elevated geopolitical risk and an intensifying pushback against globalisation. The crisis may heighten each of those trends. There are three factors which will determine the severity of the economic downturn of the country:

•            The extent of the isolation and social distancing measures

•            The duration for which they are in place

•            The fiscal and monetary policy response

Considering the above mentioned and the level of uncertainty around the length and duration of social distancing measures globally, it is almost impossible for specific point forecasts to be accurate. However this is a time to follow up with leads and look for opportunities as there will be many commercial units that are feeling the strain on the significantly less traffic and footfall. So as developers this is the time to follow up or reach out to such vendors and see whether there is a WIN WIN deal to be done. Ultimately you want to ensure that you are realistic in timescales and resell values in a slow market.

It is as a result of the above mentioned social distancing policies that will change the way people inhabit, and interact with physical space.  The knock on effects of the virus outbreak have made the demand for many types of space go down, perhaps for the first time in modern history. This has no doubt affected the real estate industry. Beyond the immediate challenge, the longer the crisis persists, the more likely we are to see transformative and lasting changes in behaviour. Although it is mentioned action should be taken and that we should seek these moments as potential opportunities to respond and deal with the current and urgent threat of COVID-19, and to lay the groundwork to deal with what may be permanent changes for the industry after the crisis, real estate leaders must take action now. Many will centralize cash management to focus on efficiency and change how they make their portfolio and capital expenditure decisions. As the crisis affects commercial tenants ability to make lease payments, many operators will need to make thousands of decisions for specific situations rather than making just a few, broad based portfolio wide decisions.

Over the past several years, real estate investments have generated steady cash flow and returns significantly above traditional sources of yields- such as corporate debt – with only slightly more risk. Since the virus outbreak, however, this reality has changed, and real estate players have been hit hard across the value chain. Service providers are struggling to mitigate health risks for their employees and customers. Many developers cant obtain permits and they face construction delays, stoppages, and potentially shrinking rates of returns.  Meanwhile, many asset owners and operators face drastically reduced operating income, and almost all are nervous about how many tenants will struggle to make their lease payments.

Consumers forced to shop online because of closed malls and shopping centres may permanently adjust their buying habits for certain categories toward e-commerce. Before the pandemic, consumers were already shifting their spending away from physical stores. This long-term trend may accelerate even faster after the crisis—especially as many previously struggling brands are tipped over the edge into bankruptcy or forced to radically reduce their footprint. Early evidence from China shows some staying power in the coronavirus-driven shift to e-commerce. Within certain product categories where supermarkets or mainstream retailers competed with online retailers, substantial market share could transfer to online players.

The shift to e-commerce may also further boost already high demands for industrial space. Relatively niche asset classes (such as self-storage and cloud kitchens) could see an improvement in their unit economics, as demand density goes up when more people work from home, while other asset classes (such as co-living) may suffer. And universities forced to educate remotely for entire semesters could convince students and other stakeholders that existing tools are sufficient to provide a high-quality education at a lower cost, and a new type of hybrid (online–offline) education could become even more widely embraced.

The depth and breadth of economic impact on the real estate sector is uncertain, just as the scale of human catastrophe from the pandemic is yet to be seen. However, behavioural changes that will lead to significant space becoming obsolete in a post-coronavirus environment seem imminent. Given the potential for transformative changes, real estate players will be well served to take immediate action to improve their businesses but also keep one eye on a future that could be meaningfully different. With significant space becoming obsolete it is a great opportunity for property developers to add value.

Having said this with the new norm being more and more apparent if we look back initially 65% of property developers intended to increase their investment activity in the North substantially over the next two years setting the region up to become an ideal investment area for developers with capital growth and other sectors investing heavily up north including transport along with the governments North Powerhouse initiative. Together Finance company undertook a study and found that 57% of developers earmarked the North East as Britain’s most opportunity rich region. This was then followed by the North West at 42%, Wales (40%) and Scotland (38%), trailed by Yorkshire and Humberside (22%) and the South East (13%).

The above indicators from developers was despite the uncertainty of Brexit and the prospect of tougher economic times ahead. However no property developer could forecast this pandemic. Would this unforeseeable circumstance change the landscape of what property developers think?

I believe it would not, there of course is that element of uncertainty that arises from this. There will be hesitation but the above mentioned percentiles are most likely proportionately going to remain as they were anticipated however the density of investment will change. As you find at the beginning of the year property developers had a pipeline to do X number of sites in 2020 however with this pandemic it is very likely that they will not be able to meet their target of number of sites completed and resold. This would of course lead to putting the sites forward to undertake for the following year or of course the disposal depending on each developers cash reserves.

Prior to the pandemic developers main worries were that there were insufficient number of sites available and access to finance along with the Brexit uncertainty. However with this pandemic what you will find is the availability of sites should drastically increase as some developers are not able to retain the sites for the following year and require it to be offloaded. In which case another developer can come in and purchase the site. So you will see a lot of trading of sites during this time whilst each developer becomes clear on their construction capacity in terms of number of sites they can complete in this given year. This will ensure the developers sit down and prioritise their pipeline and dispose of sites they no longer feel they are able to complete. Equally there are other industries where sites are going to become readily available such as the hospitality, office blocks, pubs and restaurants. Each one of these types of premises could potentially be a gold mine for developers. Therefore if you know what you want and you know values of your gold mine areas this is the time for opportunity.

To throw another spanner in the works as if it is not enough! The bigger threat is if this snowballs into a long term global recession. What happens to the world when a major supplier like China catches COVID-19? The risk of a profound global recession have surely increased, with potentially significant consequences for long term housing demand and affordability.

Each developer is wondering whether they should purchase now or wait till the recession to purchase. Forecasters have predicted we will indeed be heading into a recession but the question is timing. Should developers withhold themselves until such a time period comes and then purchase deals outright? The answer is not a straight forward yes or no as it entirely depends on the deal that is in front of you. Provided the deal on the table is a very good deal that potentially you would have taken if there was even a recession then of course it would be a good idea to purchase now. If however you feel the deal is overpriced and in a recession it may potentially drop then it may be worth waiting not leaving it! Keep in touch with the seller and see whether their circumstances and expectation changes during a recession as a lot of sellers decide to go one of two ways either they sell at the lower price as they have to off load assets or they would try to ride the wave so to speak! So always keep in touch with your sellers as you never know when a good deal can arise with or without a recession looming.

 Of course home purchases may be among the first decisions to be put on hold in the event of both social and economic uncertainty. However does that mean as a developer you stop purchasing sites? If at full capacity then yes! HOWEVER if you have taken into account resell price reductions and increased timelines for the resell of the units due to the slow market within your site appraisals and the numbers on the deal still add up to your expected percentile on profitability, the deal is worth it. Yes although there is social and economic impact on developers to reduce their capacity of sites equally other sectors are feeling the same pinch; in which case there are good deals to be done during this climate as you will find sellers have more issues than just the bottom line price to consider. They would be looking at speed, deliverability of a buyer in such a climate. If you are a developer able to expedite and execute on transactions then you can get some very good deals while other developers ponder over sites.

It seems as though COVID – 19 combined with the floods, and Brexit have wrecked any positive effects that political certainty since the election may have provided to the housing market but of course it is about adapting your plans and still progressing forward. While others are steadying the ship developers should be prepared and ready to capture opportunities when they arise but of course with limitations and realistic observations on resell prices and timelines.

The pandemic will certainly delay what was building up to be a strong market. Although it is expected to be an increased demand in the summer if the virus subsides with warmer weather. Whether that is scientifically possible we will tell shortly. The increased demand is partly due to the reduced interest rates which would lead to lower borrowing costs that will increase developers appetite.  Ultimately the pandemic has created uncertainty however as developers you will always find challenges and hurdles within business it is just a matter of adjusting, being realistic with expectations and keeping a look out for valuable opportunities during a time where sellers may not just be looking to sell at a set price.

Boris Johnson has warned that the government “may have to do more” if ministers feel current lockdown rules are not enough to stem the current spike in coronavirus cases, and that could include a halt on people moving into homes in England, whether as owner-occupiers, private or social renters.

The government has faced calls for a tightening of the restrictions in recent days in order to help reduce Covid-19 infections.

Labour leader Keir Starmer yesterday called for property viewings to be stopped during the current lockdown, but ministers are already understood to be considering how to achieve greater enforcement, and that includes, among other measures, property viewings and all home moves being stopped “locally or nationally for a short period of time”, according to government guidance.

Speaking during a visit to a mass vaccination centre in Bristol yesterday, Johnson said: “We’re going to keep the rules under constant review, where we have to tighten them, we will. ”The prime minister last week announced a set of new national restrictions for England, similar to those in place in March last year, but unlike the first lockdown, the housing market remains open for business, with people permitted to move and estate agents allowed to operate by going inside homes.

“Of course, if we feel things are not being properly observed, then we may have to do more,” Johnston added. “But, far, far better for people to obey the rules that we have, than to simply promulgate new rules.”

Updated government guidance provides useful advice on the impact tighter restrictions could have on moving home, and in turn sales and lettings activity.

Government advice on home moving during the coronavirus outbreak states: “It may become necessary to pause all home moves locally or nationally for a short period of time to manage the spread of coronavirus. We will let you know if this needs to happen.”

Agents need to make those who are about to enter into a legally binding contract aware that they should, according to the latest government advice, “discuss the possible implications of Covid-19” with a legal professional “and consider making contractual provisions to manage these risks”.

The guidance adds: “You should not expect to immediately be able to move into any home where people have Covid-19 or are self-isolating”.

Those renting a property, letting agents and landlords should be aware of and follow the government guidance on coronavirus and renting which contains further advice that may also be applicable such as on possession proceedings, repairs, maintenance and health and safety.

Leasehold revolution! Rip-off charges that trap families in unsellable homes will be banished in bid to end scandal of unscrupulous landlords

Housing Secretary Robert Jenrick unveiled new laws to help leaseholders today Changes will mean almost 4.5m people will be ‘thousands of pounds better off’ Rip-off charges which trap families in unsaleable homes are set to be banished Campaign groups welcome Housing Secretary’s ‘anti rip-off landlords charter’

Nearly 4.5million leaseholders in England will be ‘tens of thousands of pounds’ better off as a result of laws to be unveiled today by the Housing Secretary.

Robert Jenrick said his attempt to make it cheaper and simpler for leaseholders to buy their properties is the biggest property law reform since Margaret Thatcher’s right-to-buy revolution in the 1980s.

Ground rents will be scrapped for millions with a new right to extend leases to 990 years. They will also be reduced to zero on all new retirement homes.

The Government said the changes ‘could save households from thousands to tens of thousands of pounds’.

Mr Jenrick will also pledge to boost moves to allow residents of flats to take charge of running their blocks, freeing them from sky-high maintenance charges by landlords accused of ‘ripping off’ leaseholders.

He wants to increase the number of commonhold agreements, a little-known form of ownership that allows residents of apartment blocks to maintain it themselves or employ a maintenance firm to do it.

It would mean that if the company fails to do the job properly, the residents could sack them.

Leaseholders groups welcomed Mr Jenrick’s ‘anti rip-off landlords charter’ and warned him not to let powerful landlords block it.

The announcement is intended to start the phasing out of leaseholds, the origins of which date back to William the Conqueror.

Mr Jenrick’s announcement comes after a Daily Mail campaign to end ‘toxic leaseholds’ used by developers of new housing estates to force owners to pay soaring costs.

It has been claimed that 100,000 families cannot sell their homes because their contracts are so unfair.

Mr Jenrick said the Grenfell Tower disaster, in which 72 people died in an blaze in London in 2017, highlighted the need for reform.

Writing in today’s Daily Mail, he says: ‘The Grenfell Inquiry has laid bare some of the astonishingly brazen behaviour of developers and managing agents in cutting corners and putting residents at risk.

‘This is a corporate scandal. We are – and will continue – holding them accountable.

‘The Government is working at pace to develop further financial solutions to protect leaseholders from unaffordable costs.

‘The scandalous pitfalls of leasehold are being banished by this Government, and we are putting fairness back at the heart of the housing system.’

There have been a series of botched attempts to reform leasehold laws in the last 50 years.

Some landlords have sold on freeholds to third parties who only allow homeowners to buy them out for exorbitant fees.

Some leaseholders have had to pay huge sums for permission just to add a conservatory to their house.

A Law Commission report said last year the ‘medieval’ leasehold system was not working.

It was time to end ‘high, escalating and onerous’ ground rents, excessive service charges and profiteering by developers, the report said.

The commonhold system had been used successfully by other countries, the Commission added.

Mr Jenrick will set up a Commonhold Council of experts to decide how such an agreement would work, such as if there are freehold and leasehold residents in the same apartment block.

When the new law is introduced, leaseholders will be able to work out the cost of their premium – the payment to the landlord for purchasing the freehold or extending the lease – via an online calculator.

At present it can cost tens of thousands of pounds to extend when a lease has less than 80 years to run.

Katie Kendrick, of the National Leasehold Campaign, warned against giving landlords too much say in the commonhold plans.

‘We cannot trust those who created this scandal to be part of the solution,’ she said.

This will put an end to the rip-off charges that soured the dream of home ownership

By Robert Jenrick MP, Housing Secretary

For many Daily Mail readers, owning a home of your own is hugely important. It’s an aspiration every Conservative government has sought to realise for as many people as possible.

But, for those who have bought a property with a lease imposing crippling ground rents, additional fees, and onerous conditions, the dream of home ownership has been soured.

That’s why, today, the Government is announcing the biggest change to how we own homes for generations – an end to the unfair practices and legal loopholes which have dogged the leasehold market.

In all this we will be guided by the simple insight that most of us aspire to be homeowners, in the truest sense of the phrase – owners not leaseholders.

Instead of only being able to extend your lease for 50 or 90 years, both leasehold house and flat owners will now benefit from a standard lease extension of 990 years or ownership into the year 3000!

Importantly, these extensions will also be at zero ground rents, ending the reprehensible behaviour of developers sometimes doubling or even tripling these charges within just a few years.

Millions of eligible homeowners will be able to buy their freeholds at a lower price than what they currently pay landlords.

There will be a simple formula where the amount attributed to ground rents in the calculation will be capped.

We’re also scrapping the complex and opaque process for leaseholders looking to buy their freehold or extend their lease – abolishing prohibitive and arcane costs like ‘marriage value’ and prescribing fair rates in a new, straightforward calculation which will cut the cost of extending a lease or buying the freehold and potentially saving leaseholders thousands of pounds.

Leaseholders will be able to log on to an online calculator – further simplifying this process and breaking down barriers for homeowners across England.

We’ve already committed to ending ground rents in many new leases and, today, we are announcing this will be extended to include all new flats in the retirement sector as well. If any group deserve protection from rip-off practices it is surely the elderly.

Across leasehold, some practices have, quite literally, been indefensible. Ordinary family houses have been sold as leasehold for no reason bar eking out a bit more profit for developers.

Absurd charges have been levied for simple day-to-day things like putting up a satellite dish or building a conservatory.

The changes we are bringing about will make the leasehold system fairer, cheaper and simpler.

We will be legislating to bring these about, first fulfilling our commitment to abolish ground rents this year and then taking forward widespread reform.

Leasehold reform is a complex issue, as demonstrated by the fact that successive post-War governments have wrestled with it.

Harold Wilson’s government enabled a limited right to extend a lease and/or acquire a freehold, while Margaret Thatcher gave the right to first refusal where landlords wished to sell.

John Major then oversaw the most radical reform, enabling leases to be extended for an additional 90 years and a clear right to buy the freehold, after a battle with vested interests.

And Tony Blair provided an alternative tenure to leasehold, Commonhold in 2002 (freehold ownership of flats with joint responsibility for the common parts), but poor legal drafting and even worse promotion meant it hasn’t gained traction yet.

None succeeded in settling the issue or wholly countering the criticisms.

The Law Commission has recognised the advantages of Commonhold, and we now need a bold effort to make this tenure more widespread and work through the practicalities with great care.

That’s why I’m establishing a Commonhold Council, a partnership of leasehold groups, industry and government to do just that.

The announcement we are making today is a giant stride forward in the long history of English property rights.

The scandalous pitfalls of leasehold are being banished by this government, and we are putting fairness back at the heart of the housing system.

And as we focus on fairness, we know The Grenfell Inquiry has laid bare some of the astonishingly brazen behaviour of developers and managing agents in cutting corners and putting residents at risk.

This is a corporate scandal. We are – and will continue – to hold them accountable.

The Government is working at pace to develop further financial solutions to protect leaseholders from unaffordable costs.

We will always put the interests of leaseholders first. This is a massive and immensely complex challenge.

We understand the importance of getting this right and fighting for homeowners so they can move on with their lives with renewed hope, in safety and security.

Q&A: What is leasehold and what are the related problems?

What is leasehold?

When a property is sold as leasehold, the buyer owns only the house, not the land.

The freeholder retains the lease, meaning the buyer has to pay ground rent, and has to ask for consent before making changes to the property.

What are the problems?

Leasehold owners mostly used to be flat dwellers who paid a small ground rent, sometimes as little as £1 a year.

That changed when developers started to sell houses with leasehold contracts.

Many set the ground rent at £200 to £400 each year, doubling every ten years.

The freehold can also be sold to a third party, who can increase the costs to make a profit.

Why don’t they sell?

Many find their homes are almost unsellable because some lenders won’t grant mortgages against homes with excessive ground rent clauses.

Prospective buyers may also be turned off by conveyancing solicitors.

So what is the Government doing?

Ministers want to make it easier for 4.5 million leaseholders in England to buy their freeholds.

They say the changes will mean the cost of buying a freehold or extending a lease to 990 years will fall by a third.

Some could save up to £9,000. There will be a cap on how much leaseholders will pay to extend their lease or buy the freehold.

No ground rent will be payable once the freehold is purchased or lease extended.

What about ‘commonhold’?

The Government is establishing a Commonhold Council, a partnership of leasehold groups, industry and Government – to prepare for a wholesale switch to commonhold ownership.

This allows residents in a building to own the freehold of their individual flat and appoint someone to manage shared areas.