BernieW

Registered with Property118.com
Thursday 9th April 2020


Latest Comments

Total Number of Property118 Comments: 39

BernieW

13:49 PM, 11th February 2021
About 2 weeks ago

Selling Leasehold and Retaining Freehold?

Freehold value depends upon a number of factors ... ground rent income ... the length of the unexpired lease terms and the market value of the flats ... is the freeholder responsible for management of the building ... does the freeholder insure and recover costs via service charge. You've not provided any of those factors, so it is not possible to accurately answer your question.

However, let's assume you going to create new leases. These would generally be for a term of 125 years from now. Ground rent would generally not be more than 0.1% of the market value of the flat - so a £200,000 flat would have a starting ground rent of £200 per annum. That ground rent would probably be reviewed every 10 years, by reference to Retail Price Index os similar. The landlord would normally insure and manage. That would currently produce a freehold value of 10x to 15x the total ground rent, on such a small block of flats.

Capital Gains Tax depends on a wider picture, not just the building. However, if you own the building personally (in your personal name) and you create leases where your Limited Company becomes the leaseholder (i.e. you personally own 100% of the shares), then arguably that is a transfer of property not a sale of property. That may produce no stamp duty -as there's no 'sale'. That may also produce no capital gain - as the value of the flats equals the value of the shares/company ... and your left hand loses what your right hand gains.

HOWEVER - if you are selling the flats to third parties and not to your own company - then that will produce income and capital gains tax. The extent of that CGT depends upon your wider tax picture and history.

And if you're selling both flats to third parties, why would you want to retain the freehold - and thus retain responsibility for the management of the building ... which carries risks and liabilities?

Happy to discuss. Bernie Wales... Read More

BernieW

14:22 PM, 8th January 2021
About 2 months ago

What will happen now for current pipeline leases extensions?

Advice in connection with yesterday's announcements must be given on a case by case basis. There are several factors to take into account - any of which will affect an individual situation differently; e.g.

> Is the current unexpired term more than 80 years and how close to 80 years are you? Marriage value is proposed to be abolished - so where you're extending and currently more than 80 years, then that element of the valuation remains unchanged. But if you're nearing 80 years marriage value may come into play if/when you trip over that line. Waiting may be a mistake.

> Is there a 'need' to extend now; e.g. for a sale or remortgage? If not, and if you're well away from the 80 year mark, then delaying and waiting for the new legislation might be worthwhile.

> The proposed +990 years is far better than the current +90 years. But the government also proposes to 'prescribe' deferment rates and other cogs in the valuation mechanism. We don't know what those rates will be - and there is the possibility that the bottom line figure may therefore be worse rather than better - especially if property prices generally rise between now and then.

> The governments priority is improving new build - either with zero ground rent leases, or commonhold. Those proposals have cross-party support and are likely to meet little or no opposition. They'll arrive soon...ish.
But the proposals to tinker with existing contracts (e.g. abolish marriage value) will meet with much opposition from wealthy freeholders, some of whom sit in the House of Lords. There might even be appeals and long drawn out legal objections. Thus those proposals may be signifiantly delayed in reaching the Queen's desk for signature. Can you wait that long?

It's a case of crystal ball gazing - and everyone's crystal ball will see differing things.

And apart from that - the devil will be in the details ... and we don't know the details. Watch this space!... Read More

BernieW

12:02 PM, 2nd December 2020
About 3 months ago

Does increasing Ground Rent increase the valuation?

I agree with the other replies - don't respond to the leaseholder until you have advice and understand the territory. This video might assist > https://berniewales.co.uk/short-leases/

In brief though - there are several factors which influence the value of the freehold. Firstly there is ground rent income - so increasing ground rent income increases freehold value.
Secondly there is the 'present value' of the future vacant flat at the end of the lease term. By extending the lease, you are making that vacant possession further away - and thus it reduces the freehold value.
Thirdly there is marriage value, if it applies.
In short, the calculation of the lease extension premium is aimed at compensating you for the negative effects of the extension. That's with a "statutory extension" of course.
But you can increase your overall value by agreeing terms with the leaseholder, outside the statutory rules. However, that needs specialist advice and assistance.

Happy to discuss.... Read More

BernieW

16:52 PM, 17th November 2020
About 3 months ago

Unfair Garage Rent Payment?

The devil will be in the detail, so RTBL. If you can't read the lease and understand it - email it to me and I'll do it for you.
Usually, there is a clause where the matter is referred to an RICS appointed value, if agreement cannot be reached. Have you found that clause?
The LVT no longer exists in England (it's still there in Wales) having been replaced in July 2013 by the First-tier Tribunal (Property Chamber) Residential Property. Their jurisdiction may not cover garages, as they're not residential as such.
Happy to discuss.... Read More

BernieW

16:46 PM, 17th November 2020
About 3 months ago

Surprised by low offer from leaseholder?

Reply to the comment left by Jamie Harris at 17/11/2020 - 11:07
Never take figures from another leaseholder - as individual lease extensions have individual circumstances.
Punch the information into the LEASE online calculator to get a rough premium amount > https://www.lease-advice.org/calculator/
Happy to discuss specifics.... Read More