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In a time of universal deceit – telling the truth is a revolutionary act

The launch of our new relativity graph

fullsizeoutput_82aI am very pleased to launch our new relativity graph for 2017. This is the first graph every produced working on behalf solely of leaseholders.

What follows is a technical examination of our graph and some of the issues we have to overcome when trying to establish a fair price for a lease extension or freehold acquisition.

1.1 What is Relativity?

According to the RICS, ‘leasehold relativity’ is the value of a dwelling held on an existing lease divided by the value of the same dwelling in possession to the freeholder, expressed as a percentage’.

Following the introduction of the Leasehold Reform, Housing and Urban Development Act 1993 (as amended), ‘the Act’, the declining lease of any flat (or dwelling that cannot be described as a ‘house’) subject to a statutory lease extension is likely to increase in value.

The value of a flat held on an existing lease is determined by the application of a ‘relativity’ percentage and this amount is deducted from the proposed extended lease value of the flat, together with the freeholder’s reversionary and ground rent interests. The result is known as ‘marriage value’ and when a lease has fallen below 80 years unexpired, 50% is payable to the freeholder (and/or any intermediate leaseholder). Typically, valuers use averages of established relativity graphs, together with their own experience, to ascertain what the relativity percentage should be at any given number of years remaining on a lease.

1.2 The Use of Relativity Graphs

It is worth considering the evolution of these graphs and why they are now partly used in determining how much leaseholders should pay.

Relativity graphs have been accepted for many years as a justifiable means of deciding relativity, but it is widely acknowledged that a high degree of scepticism and subjectivity surrounds these graphs. Some valuers choose to use one or two in isolation, whereas some use an average of graphs (a practice which has more recently become known as ‘Kosta averaging’ii). However, most of the graphs were created many years ago and predate the property market crash of 2007/8.

There is no regulating body overseeing the compilation of these graphs. Subsequently, various methods are used to create them – most commonly by freeholders or valuers representing them – and the variance in data means these graphs are largely incongruent. One could therefore argue that none of the graphs available to practitioners are entirely accurate.

It is fair to say that the vast majority of relativity graphs favour the interests of freeholders, as leaseholders’ valuers have never invested in the compilation of a graph that better represents their own perspective.

Also, the majority of these graphs use data from the Prime Central London (PCL) market, which is not suitable to be used for a Greater London demographic.

This was highlighted even further in a recent Upper Tribunal (Lands Chamber) decision following the case of Sloane Stanley Estate v Mundy (2016). In this decision, the most frequently used relativity graphs were examined by the judges and each received criticism.

In this decision the judges expressed an opinion that much of the evidence used to compile these graphs had been “altered subjectively” and achieved “favourable settlements” for their retained freeholder clients. It was suggested that many of these graphs, which have been used for decades, were out of date and no longer relevant.

In the Mundy decision, it was suggested that the Gerald Eve (1996) graph, which was compiled by valuers retained by freeholders and using data from PCL properties, may be the most likely ‘go-to’ graph when advising potential purchasers. However, this is not the only graph adopted by valuers. A more reliable graph is required in order to redress this balance.

 

1.3 Real World Evidence (RWE)

RWE can be established by looking at thefullsizeoutput_827.jpeg sale price of a property with either a long or short lease and using that evidence to project what the relativity should be. This has become the favoured method used by freeholders’ valuers since the Mundy decision was released.

In the Mundy decision, it was suggested that RWE could be the best method to calculate relativity, as follows: “In some (perhaps many) cases in the future, it is likely that there will have been a market transaction around the valuation date”; it was then stated, “If the price paid was a true reflection of the market value for that interest, then the market value would be a very useful starting point for determining the value of an existing lease.”

This one paragraph has added considerable uncertainty to the Greater London market with regards to calculating relativity.

Even though the Mundy decision says RWE would just be a “very useful starting point” , the majority of valuers representing freeholders have been quick to adopt this suggestion as a cast-iron direction from the Upper Tribunal to put forward anomalous ‘evidence’ of sales of flats held on short, unextended, leases. This has enabled them to ask for much higher premiums on behalf of their clients.

Leasehold Valuers is finding that freeholders’ valuers are increasingly asking for disproportionately low relativities (and consequently much higher premiums for their clients), disregarding any reference to the existing graphs whatsoever.

On the face of it, using RWE seems like a common-sense approach to establishing relativity. However, this method is as subjective – or possibly even more so – than using the graphs to determine the likely value of a flat held on a lease having a given number of years unexpired.

The best-case scenario for RWE may be to consider and compare the sale price of three flats held on unextended leases (having the relevant unexpired term) and the sale price of three flats held on extended, or ‘long’, leases, each being of the same condition and ‘flat type’ within the same block and having sold close to the valuation date.

Furthermore, it could be proved each sale took place as per the RICS’s definition of Market Value; i.e. that it was ‘between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’

In our experience, it is very rare to find examples of two or more flats that have sold within the same block, one (or more) having sold on an unextended lease (of the required unexpired term) and the other(s) having sold on an extended, or ‘long’, lease, which match in terms of size (number of rooms and/or gross internal floor area), floor level, aspect, layout, general condition, and having the same proportion of outside space, and so on.

If these ingredients are not available, the valuer might search for ‘comparable’ flats nearby and/or in similar blocks. In our experience sales evidence that does not support a valuer’s position is then often omitted. Subjective adjustments are also made for flat size, location, date of sale, improvements, and so on. The result is often evidence that conveniently supports an often unrealistic position on relativity.

Furthermore, information about sales of flats held on unextended or ‘short’ leases is likely to be deeply flawed in the first place. Even though those working in the residential leasehold sector cannot agree upon a particular graph, dataset or method to determine the value of a lease of a particular length, it is assumed sellers and purchasers of flats have a real understanding of relativity and have made an informed decision on value based upon the unexpired term at the point of sale. This is not the case.

fullsizeoutput_82bReferring back to the definition of Market Value, where both parties were not advised and/or represented by a special- ist (enfranchisement) valuer when the sale price was agreed, it could be argued they did not act knowledgeably or prudently. Also, there may have been an element of compulsion on the part of the seller (perhaps influenced by their estate agent) to accept a lower price based on fear of losing the purchaser and/or the purchaser’s over-estimation of the likely costs of extending the lease, due to their own fear or manipulation.

Furthermore, it can also be difficult to be obtain enough information to be certain of the genuine circumstances behind each sale. For example:

Was the flat sold below Market Value to a connected party, such as an associated company or a family member?

Was the flat marketed properly with a realistic guide price?
Were the seller and/or purchaser poorly advised?
Did the seller accept a lower price because they were desperate to move or dispose of the flat?

Did they sell below Market Value because they were in financial difficulty or it was a distress sale?

Was the purchaser a non-UK national and therefore less likely to understand the leasehold system?

Did they become emotionally attached to the flat and were therefore willing to pay more for it?

Was the sale a cash purchase?

There are multiple scenarios that can affect the sale price of a property, let alone a flat held on a ‘short’ lease. These are unlikely to be obvious to an estate agent, let alone a valuer representing a third party in respect of a lease extension.

RWE evidence also highlights other potential anomalies regarding the relativity percentages being suggested by freeholders’ valuers. Leasehold Valuers has seen proposed relativities at particular lease lengths that differ significantly between neighbouring locations within the Greater London area, and even some that vary significantly in the same blocks or in blocks situated close to one another.

Leasehold Valuers questions whether each flat size, block, street or borough should really have a different relativity. The Act has now been in place since 1993 and tens of thousands of statutory lease extensions have been completed since then. Given the vast amount of data available, there is no justification for sporadically calculating relativity on a block-by-block or flat-by-flat basis.

The Mundy decision seems to have divided opinion on relativity like never before and generated an increase in variation and inconsistency between practitioners. This subjectivity is frequently being used by freeholders’ valuers as a means of demanding significantly higher premiums from leaseholders for lease extensions. This subjectivity also seems to have given freeholders the ability to ‘hold leaseholders to ransom’, using the threat of the costs of litigation to force them to agree to increasingly lower relativities and subsequently higher premiums.

There is, however, increasing evidence to suggest the First-tier Tribunal (Property Chamber), or the ‘FtT’, is rejecting the advice given in the Mundy decision to use RWE.

Two recent decisions, which have been released post-Mundy for flats in Greater London, indicate FtT judges do not blindly subscribe to the view that RWE is always the best method to use.

One of Leasehold Valuers’ FtT cases, which was in respect of 84 Morieux Road, London E10 (LON/OOBH/2016/1321), decided in favour of the leaseholder whereby the Kosta-averaging method was applied (using three graphs), over a proposed RWE method adopted by the intermediate leaseholder. In their decision, the judges wrote “we consider that the most appropriate method of establishing relativity in this case is to utilise the graphs.”

In a separate case, FtT judges came to a similar conclusion in favouring the averaging of five graphs to determine a fair relativity over flawed RWE. In this case, which was in respect of Flat 31 at Anerley Court, London SE20 (LON/00AF/ OLR/2016/0706), the judges concluded that they “agree with the reasoning put forward…for not abandoning the RICS research document, and the evidence of the graphs contained therein”.

Of course, those victories came with a price tag; namely the litigation costs of the litigation borne by the leaseholders.

The arbitrary use of RWE has another aspect to it, which also needs to be taken into account. Once the relativity percentage at the given unexpired term has been established, a further adjustment needs to be considered to account for a ‘no-Act world’.

 

1.4 ‘No-Act World’ Adjustment

The Act provides that the calculation fullsizeoutput_826of the lease extension premium must disregard the existence of the rights provided by the legislation itself. This is because granting flat owners the legal right to extend their leases in 1993 is said to have affected the Market Value of flats held on ‘short’ leases (in relative terms). Essentially, this stipulation requires a hypothetical adjustment to whichever existing lease value is determined. Therefore, to comply with the legislation, valuers are required to determine the Market Value of the existing lease in a ‘no-Act world’.

By the same virtue, it has also been suggested that a flat held on a lease with legal rights to a lease extension or to collective enfranchisement (known as ‘enfranchiseable leases’) should be worth more than the same flat held on a lease without such rights. This would mean when establishing the ‘value’ of the legal right of a lease extension (or collective enfranchisement), the valuer is required to research sales of properties held on ‘enfranchiseable leases’ and then compare them with sales prices of comparable properties held on ‘unenfranchiseable leases’ (of the same length).

This is a virtually impossible task, given there is an extremely small number of ‘unenfranchiseable’ leases in the real world, which change hands very rarely; therefore, there is no way such a difference in value may be determined. The Mundy decision suggests ‘a competent valuer should be able to make this [no-Act world] deduction based on their experience’.x Therefore, the ‘no-Act world’ deduction is an arbitrary one, which has no unopposed evidence whatsoever that can be used to help justify what this deduction should be.

A valuer representing a freeholder is likely to “make this deduction based on their experience” and propose the largest ‘no-Act world’ deduction to reduce the relativity percentage even further, whilst a valuer representing a leaseholder will do the opposite.

It has been suggested the amendment to the Act following the implementation of the Commonhold and Leasehold Reform Act 2002 may have decreased existing lease values. This legislation introduced the 80-year threshold for the addition of 50% marriage value as part of the lease extension premium. Prior to 2002, an 80-year lease was not widely considered a ‘short’ lease. However, since 2002 more and more buyers, estate agents and solicitors have begun to place an emphasis on the ‘risks’ of sub-80 year leases and lower prices have been paid for them, potentially having a domino effect on the cost of a lease extension. Prior to the implementation of the 1993 legislation, freeholders were granting brand new leases of 60 or 65 years, which buyers were seemingly unconcerned about. Accordingly, existing lease values may actually be higher in the minds of those in the ‘no-Act world’.

The use of RWE was not particularly commonplace prior to the Mundy decision. It has been suggested this may have been because the difference between sales prices of unextended leases and extended, or ‘long’, leases within some blocks used to be fairly narrow and freeholders’ valuers preferred the lower relativities represented by certain graphs. A gradual depression of unextended lease sale prices following the introduction of the 80-year threshold, however, might be the reason RWE is now of greater assistance than the graphs to which freeholders’ valuers once referred; especially after they have chosen a subjective ‘no-Act world’ deduction.

Surely, in the 21st century, there must be a more scientific and consistent method of determining relativity in a ‘no-Act world’?

1.5 Hedonic Regression

In recent years there have been attempts to use the accepted hedonic regression method in an attempt to scientifically establish what relativity in the ‘no-Act world’ should be. Most recently, this method was adopted by Parthenia Research to do just that in the Mundy case.

The method was comprehensively rejected by the judges in the Mundy decision, notoriously concluding Parthenia’s hedonic regression model “the clock that strikes thirteen”.

1.5.1 What is Hedonic Regression?

Hedonic regression breaks down the item being researched into its constituent characteristics, in this case the number of bedrooms, location and lease length, and so on, and produces estimates of the value of each characteristic. From this data, a curve can be deduced on the appropriate relativity percentage and a graph can be produced.

Leasehold Valuers supports the principles of hedonic regression and looks forward to a time when an unpartisan scientific relativity graph will be produced using this method.

LeaseholdValuersopenlycriticisedthedecisioninMundy.ItunconditionallyrejectedthePartheniamodel,whilstatthesame time proposing the Savills 2015 (hedonic regression) graph could be adopted in the PCL market, even though we understand the Savills graph has the same technical issues the judges had misgivings about with the Parthenia model.

1.6 The Delaforce Effect?

It has been suggested when a freeholder is faced with a group of leaseholders collectively taking action against them, they will agree lower extension premiums to avoid the costs of representation at a hearing of the FtT. Therefore, it may be argued the relativity achieved is not an accurate reflection of what it ‘should be’. However, it is clear that, overall, the Delaforce effect benefits freeholders and prejudices individual leaseholders.

The vast majority of freeholders are of greater financial means than the average leaseholder (certainly in Greater London) and therefore do not fear tribunal fees as much as leaseholders. Furthermore, the costs of tribunal representation are tax-deductible for freeholders, but generally not so for leaseholders.

Freeholders will invest money to establish a valuation ‘principle’ for their portfolio to ensure future lease extensions achieve higher premiums, so they are prepared to go to the FtT do just that (and appeal any FtT decision that goes against them). Leaseholders are not usually inclined to take such action, as their sole interest is likely be represented by a single flat within a block or development and their stance might be less aggressive.

Any influence of the Delaforce effect has been excluded from our graph and any settlements involving small or ‘accidental’ freeholders have been omitted. All the freeholders of the settlements in our graph are commercial, institutional freeholders.

That said, we have produced a secondary graph to demonstrate how the Delaforce effect might impact relativity (Appendix 5), in order to act as a straightforward comparison with LV 2017. The Leasehold Valuers Delaforce Graph has been compiled using settlement data gathered whilst acting on the behalf of clients of Leasehold Solutions. As Leasehold Solutions is an intermediary instructed by groups of leaseholders to project manage lease extensions of flats within a particular block or development, any lease extension completed by them has been part of a group action. The average group size within this collection of data is 7.4 leaseholders.

The Leasehold Valuers Delaforce Graph is comprised of the relativities from 1,213 settlements and shows that the relativities agreed are, on average, 0.8% higher than the Leasehold Valuers Graph 2017. Accordingly, it may be determined that by taking group action, leaseholders may achieve a relativity 0.8% higher compared to acting individually.

2.1 The Data and Methodology

fullsizeoutput_828The Leasehold Valuers Graph 2017 is based on settlements agreed between leaseholders and freeholders. As Leasehold Valuers acts solely on behalf of leaseholders and the dataset is compiled wholly from settlements where the company has acted on behalf of the leaseholder of a statutory lease extension claim.

From the 3,000 transactions carried out by Leasehold Valuers, this dataset is derived from 2,356 settlements reached during the two-year period from January 2015 to December 2016.

Each and every settlement has been scrutinised in order to respond to the criticism levelled at settlement graphs and to ensure all possible anomalies have been removed.

Any mitigating circumstances that might skew the result have been removed. These include all relativities from all lease extension claims that were:

Subject to a hearing of the FtT or the Upper Tribunal (Lands Chamber);

In PCL or outside the M25 orbital motorway;
Part of a group of claims, in order to eliminate any Delaforce effect;
Subject to onerous or anomalous ground rents;

Subject to capitalisation rates and/or deferment rates not mutually agreed by each party;
Where the freeholder was a small or ‘accidental’ freeholder; all the settlements are with professional ground rent investors; • In respect of leases having less than 30 years unexpired, where there was a paucity of settlement evidence.

This process reduced the dataset from 2,356 settlements to 503, incorporating no opinion at 30 years unexpired and above. Between 30 and 79.9 years unexpired, the graph is based on pure, untainted, settlement evidence of 503 statutory lease extensions of flats within Greater London during the period from January 2015 to December 2016. There are no leasehold houses included in the dataset.

Geographically, each of the 503 settlements is outside what is regarded to be PCL (Prime Central London), but within the M25 orbital motorway. The settlements are fairly equally spread across Greater London and no one borough or area is disproportionately represented.

The Leasehold Valuers Graph 2017 includes relativities at 79.9 years down to 30 years unexpired. The relativities below 30 years are merely Leasehold Valuers’ opinion and are only included on the graph for continuity purposes. Accordingly, the graph should only be referred to for leases having 30 to 79.9 years unexpired.

Once the dataset was cleansed and the 1,853 settlements that might skew the graph removed, it was sent to Anna Louise Schroder of the Department of Statistics at the London School of Economics. Ms Schroder then plotted our graph “using spline smoothing and interpolate values to generate a price decay curve”.

LV 2017, being solely derived from relativities collated from over 500 settlements achieved from January 2015 to December 2016, represents the fairest and most accurate way to determine relativity for flats in the Greater London area.

Schedule 6 to the Act requires the valuation of the freeholder’s interest by assessing “the amount which at the valuation date that interest might be expected to realise if sold on the open market by a willing seller.”

These settlements were achieved between two willing parties, without the need to attend the First-tier Tribunal (Property Chamber) or pursue any other form of litigation to ‘force’ an agreement.

Leasehold Valuers considers that using data from recent settlements between a willing cogent seller and an informed buyer is the fairest and least subjective graph currently in use.

Conclusion

In conclusion, we believe this graph will redress the balance for leaseholders in the determination of premiums payable for lease extensions. In preparing this graph, we have eliminated as much subjectivity as possible by only using data from transactions where the leaseholders acted both alone and against professional freeholders who were represented by enfranchisement experts. It also disregards tribunal decisions.

Of the 503 settlements analysed, which were for leases of flats having between 30 and 79.9 years unexpired, a relativity percentage had been expressly deter- mined or all other factors had been previously agreed and the only component remaining in dispute was the relativity to apply.

Taking the above into account, we are confident that the LV graph 2017 is one of the least subjective relativity graphs now available to practitioners.

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2016 a leasehold review – The worst year for leaseholders ever?

fullsizeoutput_4ccThis is a review of some of this year’s developments and how it effects leaseholders, unfortunately it’s not happy reading. It is no exaggeration to say that 2016 has been the worse year to be a leaseholder in recent memory, there is very little to be optimistic about.

Each development has made it more difficult to exert the legal rights given to leaseholders by legislation as well as making the costs of doing so rise significantly.

Court fees

This ridiculous idea was first mooted in 2015 to bring in application fees for the First tier Tribunal to be paid by the applicant and it eventually come into force in 2016.

Now, when you apply to the Tribunal, you must pay £100 and a further £200 to attend a hearing. As the vast majority of applications have to be made by leaseholders against unreasonable freeholders this extra financial burden will be borne mostly by leaseholders.

It could have been much worse though.fullsizeoutput_4c7

The second part of the governments fee plan to pay for the court system was to also include a flat fee of £2,000 per application to be paid by the applicant.

Luckily we were given the chance, through ALEP, to be able to talk to members of the DCLG before they made this final.

I was able to explain in detail how disastrous this would be to leaseholders and how much power it would put in the hands of freeholders enabling them to act even more unreasonably in negotiations.

Thankfully, the DCLG agreed to drop this second part to their proposal of increased fees.

The ‘Mundy’ decision

The much anticipated decision in the Mundy case was handed down in May this year and it has caused a seismic shift in the landscape of lease extensions.

The case, which is eye wateringly complicated, was trying to decide a method of calculating how the short lease of a property, of anything below 80 years, effects the value of it.

The behemoth that is the Wellcome Trust spent a fortune in discrediting Parthenia’s valuation model that looked to make the calculating of this loss of property value scientific and less partisan (and ergo fairer to leaseholders). ‘Accepted’ relativity graphs have always been paid for and pushed through the courts by wealthy freeholders to benefit their interests and this case was no different.

Click here to read more details of the case but it should come as no surprise that the uber rich Wellcome trust won the case adding millions to the value of their portfolio.

This has meant that the cost of extending a lease that has fallen below 80 years has risen dramatically. For example, a flat worth £400,000 with 70 years left to run on the lease will now pay around £8,000 more for a lease extension after this decision.

Good news for the already bloated freeholders but it is a wholly unfair result for leaseholders who find themselves caught in the leasehold trap.

At a valuers seminar I attended a couple of months ago, the normally dour grey-suited freeholder’s valuers were positively clicking their heels and dancing with glee at the thought of all these additional unearned fees.

When someone in the audience pointed out to the valuers on stage how unfair this Mundy decision was to leaseholders, an infamous valuer working for a large and difficult freeholder smirked and said “Life isn’t fair.”

As well as making freeholders even richer this case has caused a hardening of the freeholder’s stance across the board. This means leaseholders will have to attend the Tribunal more often to argue the unfair price demanded and pay both the application fee for doing so as well as huge fees of the professionals ‘defending’ them.

CONSOLS replace with the NLF rate
fullsizeoutput_4cdIn another complex development the government cancelled CONSOLS. This was an index used to value, amongst other things, the premium due to a head lessor for the loss of any ground rent due to them during a lease extension.

They replaced this with the wholly unsuitable National Loan Fund (NLF) which is a daily spot rate calculated on the day the Notice is Served. At its introduction the NLF rate was already considerably lower than the CONSOL rate and it continues to fall in line with the current, unprecedented, deflated interest rates.

This has real financial implications for leaseholders who have a head lessor on their property which has an element of the ground rent due to them. In a case we dealt with earlier this year the amount due to the head lessor under the old CONSOLS rate would have been £4,000 this was calculated to be £12,000 at the time of Notice Serving in September 2015. If we had Served Notice today, the amount due would be closer to £20,000!

Rule 13 wasted costs

A recent decision in the ‘Willow Court v Ms Alexandra’ case tried to make clear the qualifying criteria affecting anyone who wished to apply to have their legal fees paid for by the party who had brought an unnecessary and vexatious case against them at Tribunal.

Although the decision made it clear that this is not something this could be applied for automatically if decision went in your favour, it was only to be used only in ‘exceptional circumstances’.

The decision also stated that these application for costs should not “become a major case in its own right”

The truth is however that early evidence points to freeholders applying for these wasted costs every time they win a case to try to claim back their legal fees but more importantly to ‘teach’ leaseholders a lesson for daring to challenge freeholders in court and deter other leaseholders for going down that same route.

Right to manage by block

There was another inexplicable decision which earlier this year “Triplerose Ltd v Ninety Broomfield Road’ which seemed to go against the very spirit of the Right to Manage legislation.

This new ruling means that a right to manage application must now be done on a block by block basis. If you live on a development which contains four small blocks of flats all owned by the same freeholder, you must now make four separate applications for the right to manage. That’s four separate companies, four sets of directors and, obviously, four sets of fees and costs.

Freeholders already have a considerable collection of ruses to frustrate leaseholders who wish to take control the management of their own buildings, this decision has just added another powerful weapon to freeholders unwilling to let go of the cash cow that is management.

Ground rent scandals

This has been going on for a couple of decadesfullsizeoutput_4cb but it has certainly become big news this year with three different ground rent scandals hitting the headlines.

The first was over dodgy informal lease extension deals offered at Blythe Court in Birmingham. The freeholder there is Martin Paine, of whom Sir Peter Bottomley said ‘is a crook who is turning sleaze in leases into an art form’ at the recent debate on leasehold in Westminster.

Mr Paine sold informal lease extension of 99 years with ground rent doubling every 10 years. On completion, the leaseholders found the 99 years started from when the lease was originally granted, so the length of the lease remained the same but the new ground rent due was £8,000 a year making the flats worthless. Read the full story here.

Taylor Wimpey found themselves with a mountain of negative PR when it was brought to light that they had been selling houses as leasehold, instead of freehold, for the sole purpose of making themselves more profit while plunging their unsuspecting clients into a life time of unnecessary ground rent debt.

The telegraph also ran a story which we have been involved with which was a leasehold flat in Islington where grounds rents starting at £250 per year per flat would grow over the term of the 999-year lease to… £68,719,476,736,000 a year! A bargain.

So what does 2017 have in store for leaseholders?

I hate to be the bearer of more bad news but it looks like the freeholders are going to try to push their advantages even further next year using lower interest rates as a smoke screen to mask their naked greed.

In late 2016 we are already seeing the ‘professionals’ advising the large freeholders to try and argue lower capitalisation rates, which are used to calculate the ground rent due to a freeholder to compensate for the loss of ground rent, than those currently accepted.

An even bigger battle is brewing over the deferment rate which was set by ‘Sportelli’ in 2007. The deferment rate is used to calculate the amount due to a freeholder to compensate them for the reversion of a property. The lower the rate, which is currently 5%, the more you will have to pay the freeholder, a 1% reduction in this rate would have huge financial consequences for leaseholders across the country.

Potentially these will be one of the battle grounds of 2017 as bloated greedy freeholders look to get paid even more for a lease extension from their legally captivated victims the leaseholders.

Is there any good news at all?

unfairFor the first time in over a decade those fine people at the Leasehold Knowledge Partnership were the driving force to secure a debate on leasehold in Parliament a couple of weeks, ago which was a fiery damnation on the state of leasehold in this country.

To finally have political appetite looking at the injustices of this feudal system is a very good thing and may be the tool to fight the coming battles from greedy billionaire freeholders wishing to push their advantages.

With the political appetite comes serious interest from the press looking to expose even more of the dodgy dealings of these wealthy freeholders who live in the shadows while carrying out legal extortion on many millions of leaseholders. I have spent more time talking to the press about various leasehold scams in these last two months than I did for the previous eight years combined. There are some big exposés coming in 2017!

Finally, leaseholders themselves are becoming better informed and educated about leasehold abuses. If you find yourself in an unfair situation with your freeholder, make some noise about it! Contact your local MP and let them know, write to the papers, contact LKP and join the growing army of people demanding that this thousand-year-old feudal system should be ended once and for all.

©Barcode1966 – 2017

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