A leading legal expert has warned that the Law Commission’s proposed leasehold reforms of the leasehold system in England and Wales published yesterday could hit the block management property sector hard.
Mary-Anne Bowring, group managing director at leasehold services firm Ringley claims that, while these reforms would save leaseholders money, the “erosion of the benefits of being a freeholder would likely see an increase in non-professionally managed blocks, absentee freeholders and other court processes,” she says.
“All freehold reversionary properties are valued by Chartered Surveyors on the basis of the lease length and terms and as the RICS definition of ‘market value’ includes hope value in effect the valuation today includes the probability of some lease extension income.
“If this is to be curtailed in law, then the valuation effect is a reduction in the value of the landlord’s asset.”
The leasehold reform proposals from the Law Commission of England and Wales, which have already been welcomed by Housing Secretary Robert Jenrick (left), would see the costs of buying or extending a leasehold dramatically reduced, commonly referred to as enfranchisement.
The Law Commission claims its proposals will make the process of enfranchisement easier and cheaper for ‘millions’ of leaseholders. These measures could also make selling leasehold properties easier; potential vendors must often wait months and pay huge costs to extend leaseholds, tying up the property market.
“We consulted widely in putting together the options for reform,” the Law Commission says in a statement.
“Leaseholders have advocated sweeping reform to lower the cost of enfranchisement of their homes.
“We have heard contrary arguments from landlords and investors – including charities and pension providers – the value of whose interests would fall if premiums are reduced.”
Read the Law Commission’s summary of its proposals.