In December 2016 we produced a blog about the onerous terms which are appearing in leases for new build properties which could have an effect on saleability. One of the examples we looked at was the review of ground rent over the term of the lease which, if increased too highly and too often, could result in the property becoming difficult to sell or re-mortgage.
It is becoming increasingly more common for new build houses to be sold with leasehold tenure and not as freeholds and so it is important that purchasers are advised appropriately as to the potential risks involved, particularly those arising out of the drafting of the lease.
From April 2017 Landlords will not be able to offset the full costs of their mortgage interest against rent.
Previously, landlords could claim tax relief on any payments they made on their mortgages by off-setting their mortgage payments against the rental income they received on that property. The result was that they would only pay income tax on the difference between the two. However, the changes, which were announced in 2015 and will be phased in over four years up to April 2020, provide that Landlords will no longer be able to deduct their mortgage interest costs in full, but will instead only be able to deduct 20% of them.
A recent Court of Appeal case has considered the definition of a “house” under Section 2 of the Leasehold Reform Act 1967.
The Act allows a qualifying tenant of a house to buy the freehold or take a new lease for an additional 50 years.
In Grosvenor (Mayfair) Estate v Merix International Ventures Ltd and another, the tenant claimed that it was entitled to buy the freehold of a property from the freeholder under the Act. Between 1968 and 2000 the property had been used at times partially for office purposes, with residential accommodation on upper floors. From 2000 onwards it was unoccupied. The freeholder resisted the claim on the basis that the property was not a house. The Judge at First Instance had found in favour of the tenant and the freeholder appealed.
The Social Mobility Commission has issued a report on the impacts of family support on access to home ownership. The report reveals that the number of first-time buyers relying on funds from the Bank of Mum and Dad has reached an historic high and that the trend is set to continue.
Home ownership for 25-29 year olds has fallen by half in the last 25 years, from 63% in 1990 to 31% more recently. The percentage of those owning their own home does increase with age, but with no particular group exceeding the level of ownership for their immediate predecessors.
The only way in which a large proportion of first-time buyers can get on to the housing ladder is with help from their parents. The report released shows that 34% of first-time buyers now rely on family support to be able to buy their own home, compared with 20% seven years ago. A further 10% rely on inherited wealth to provide that much-needed deposit.
A recent article in the NuWire Investor reports that the UK property market is well placed to cope with what may lie ahead as plans for Brexit are made. International investors are being attracted to the UK property market by the low value of the pound and are capitalising on the opportunity to purchase UK property, in turn helping to prop up the strength of the property market. This continued investment, combined with the demand for housing and a strong tenant demand for private rentals, will keep the UK property market resilient against the forthcoming challenges of Brexit. Regional markets in particular will be best equipped as London is expected to take the brunt force of Brexit changes.
The government has announced that thousands of first time buyer homes will be built this year thanks to funding from the £1.2 billion Starter Homes Land Fund for new brownfield site developments.
The fund was initially announced in 2014 by the coalition government with the aim of helping more people buy their first home and get on the housing ladder.
Properties will be built exclusively for first time buyers who must be aged between 23 and 40 years old, and will receive a discount of at least 20% below market value.
In December 2016 we reported on the onerous terms that are being drafted into new leases for new-build properties which could seriously affect future saleability. The example we gave was the provision in new leases for the increase in ground rent over the term of the lease thus jeopardising the ability to sell or even re-mortgage the property at a future date.
Following on from this, there are now further reports in the media of ‘property traps’ and leasehold issues that are causing similar problems for purchasers.
A recent report by BBC News looked at the ability of an owner of a leasehold house to purchase the freehold reversion and the issues that new-build leases are now posing in relation to this.
Property transactions pose the perfect opportunity for fraudsters to try and dupe solicitors, house buyers and sellers into transferring large amounts of money into scam accounts. This is usually done by hacking into emails sent between the buyer/seller and his solicitor. In recent months, reports of this kind of incident have become more and more prevalent and it is therefore extremely important to be aware of this to minimise the risk of it happening to you.
The most recent report of email fraud was published by The Guardian where a person’s purchase of their first home ended up with him having his £67,000 life savings stolen.
In less than three months, a new, tougher tax regime on mortgaged buy-to-let properties will bite. The new regime could hit landlords hard as tax relief on mortgage interest will be phased out. This coupled with the pending removal of a “wear and tear” allowance and a 3 per cent stamp duty surcharge on any buy-to-let property purchase are making landlords feel the pressure.
At last count, Chinese enquiries into Manchester property have increased by more than 50% on last year as enthusiasm for the Northern Powerhouse continues to grow, the Telegraph has reported.
A major deal has been signed by Beijing Construction Engineering Group which will construct part of Middlewood Locks in Salford, worth £700m, and will provide 2,215 rented homes.
Since the introduction of compulsory registration, the Land Registry has halted the fraudulent registration of many properties worth many millions of pounds. However, property fraud is still a real risk we all need to be alert to as, despite the Land Registry’s best efforts, the land registration system is unlikely to ever be completely secure.
The most commonly-encountered fraud involves a person having a property registered in their own name by falsifying transfer documents. The types of property which are most at risk of this kind of fraud are those which are rented out, are unoccupied or are mortgage-free.
In the last six months following the second-home stamp duty increase, the revenue accumulated from the tax has fallen by £500 million, according to recent research conducted by the London Central Portfolio (LCP).
The super-prime market (over £5 million), has been the hardest hit by the tax changes, according to the LCP’s analysis. According to records produced by the LCP, only 9 sales have been registered above £5 million over the last 6 months.
2016 has been a tough year for UK property, but, despite this, research has shown there is still much confidence in the property sector with the residential sector being the strongest.
Property Wire has reported that 74% of senior executives in the property and construction industries regard residential property as a strong five-year investment, which is a 10% rise from 2015. 62% were confident in the outlook for the residential sector.
Landlords renting to tenants with no ‘right to rent’ will face jail following the creation of a new criminal offence, which has retrospective effect, meaning that it will apply to tenancy agreements entered into by landlords prior to the date the legislation came into force, 1st December 2016.
In summary, the new law will mean:
• Landlords will be able to evict tenants who have no right to rent; and
• There will be a new criminal offence for landlords or agents who fail to carry out right to rent checks or fail to remove illegal migrants from their property. The maximum criminal sentence will be 5 years imprisonment.
Buyers of new properties are being warned that certain onerous terms within their legal title could hit the future value of their property, or worse, make it unsellable.
The Telegraph reports http://www.telegraph.co.uk/property/house-prices/leasehold-scandal-ground-rent-that-starts-at-250-then-rockets-to/ on one real example relating to a block of flats in Islington, north London, in which the grounds rents starting at £250 per year per flat would grow over the term of the lease to an immense figure, thus affecting their value.
Property investors will face tough new mortgage affordability tests from next year which will result in ordinary investors being able to borrow far less towards their purchase.
The Government has released details of its preferreded route for the second phase of the high speed rail line HS2. The route includes a stop at Manchester Airport near Hale Barns.
In the recent case of Francia Properties Ltd v Aristou and others, the Court held in favour of a landlord who had obtained planning permission to develop the roof of a block of flats to create a new flat. The development was opposed by the tenants and the right to manage (RTM) company run by the tenants.
The latest stamp duty surcharge may mean thousands of divorce settlements could be left open to challenge. From 1 April 2016, an extra 3% levy will now be applied to standard SDLT rates on all additional residential purchases of property, i.e. where the individual ends up owning an interest in more than one residential property.
In 2014, the University of Chester obtained planning permission to construct a two-storey community rowing and fitness facility (providing boat storage, changing rooms, a new pontoon and gym) on part of its land, which would replace a dilapidated single-storey boathouse. It transpired, however, that the land was subject to restrictive covenants imposed in 1896 which prevented such a use. The covenants were:-
The positive direction of the housing market of late has resulted in more individuals seeking to sell their homes in an attempt to take advantage of the consequential rise in prices. Todays’ Conveyancer has reported that there has been a noticeable increase in supply in particular regions, such as the East of England (+30%), the South East (+23%) and Greater London (+19%), with a particular increase in key regions of London.
The enactment of the Finance Act 2016 was delayed as a result of Brexit. Previously, the Finance Bill would receive Royal Assent in mid-July, but this year it was given on 15 September 2016.
A recent article in Today’s Conveyancer reports that the number of properties on the market in the UK has risen by 1% over the months of June to September.
The report states that the number of properties under agreed offer has fallen by 2.5%, showing only a marginal decline from 39.4% in mid-June pre-Brexit to 36.1%. The decline has resulted in a 2% fall in the national average asking price of properties on the market from £297,508 in mid-June to £291,547 in mid-September.
2016 has seen the shortest time recorded to sell a house since 2010. The Rightmove House Price Index reported that the average number of days to sell a house in May 2016 was 57. This was compared to an average of 65 days in May 2015.
The Welsh government have plans to introduce a new tax to replace the Stamp Duty Land Tax currently in place to home buyers. The Land Tax and Anti-avoidance of Devolved Taxes (Wales) Bill is the first bill to be introduced as part of the new Welsh legislative programme and is the first new Welsh tax for almost 800 years.
The Court of Appeal has ruled in the case of R (Best) v The Chief Land Registrar  that where a squatter claimed title to a residential property based on his adverse possession, the fact that part of his occupation constituted a criminal offence under s.144 of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPOA) 2012 did not prevent him from qualifying for adverse possession.
A recent court judgement has found the conveyancers on both sides of a transaction liable for loss.
The High Court in the case of Purrunsing v A’Court & Co (a firm) & Anor  ruled that both sides of a fraudulent property transaction were liable for the loss suffered by a purchaser.
HMRC is currently consulting on the filing and payment procedures for Stamp Duty Land Tax (SDLT).
In the Chancellor’s Autumn Statement in 2015 the government announced that it will:-
- Reduce the SDLT filing and payment window from 30 days to 14 days in 2017 to 2018
- Consult on the SDLT filing and payment process in 2016.
The number of remortgages in the second quarter of 2016 is up 5.8% and up 19.3% on the second quarter of 2015 according to the Council for Mortgage Lenders (CML).
Myerson played host to the North West branch of the Association of Women in Property on Wednesday evening. WiP is a national organisation set up several years ago to address the lack of female representation amongst the property and construction industry.
London estate agents have revealed that interest from foreign buyers has risen by 50% since the Brexit vote.
Some analysts initially believed that Britain’s decision to leave the EU would deter foreign investors, however the opposite appears to be the case and we reported in our blog ‘The Home Buyer’s side to Brexit’* that within 48 hours of the vote, foreign investors were enquiring about London properties.
Finance Bill 2016 – proposed amendments to higher rates of SDLT for additional residential properties.
The higher rates of SDLT for additional residential properties were introduced by the Finance Bill 2006, which was published on 19th May 2016. Subsequently, on 28th June 2016, the government has proposed additional amendments to the bill, including those related to higher rates of SDLT for additional residential properties. The government is proposing to amend the Finance Bill (which is due to gain Royal Assent in autumn 2016) to exclude annexes from the supplemental 3% charge. The changes insert an additional condition into the requirements for the purchase by an individual with 2 or more dwellings to constitute a higher rate transaction. They provide that at least 2 of the dwellings must not be subsidiary to another of the purchase dwellings. It is proposed that a building is subsidiary if the following are satisfied:-
The North West division of UK housebuilders, Persimmons, reported a strong start to the year as demand for new homes continued to improve.
Neil Follows, managing director for Persimmon Homes North West stated that their private sale reservation rate was “currently running 4% ahead of the same period last year” and that visitors to their sites continue to run ahead of last year’s levels by 8%.
On Thursday 7th July we held our annual ‘Property BBQ’ in the gardens of our offices on Regent Road in Altrincham. The event was hosted by our property team and was attended by many of our property clients along with some of the North West’s leading property experts including estate agents, surveyors and financial advisors.
Since the referendum vote to leave the EU was revealed, there have been differing views on the affect Brexit will have on the property market.
In places like London it seems that overseas investors are snapping up properties. Estate agents have apparently been receiving calls from Chinese, Middle Eastern, Italian and Spanish investors looking for a “bargain”.
A BBC investigation has found that first time buyers in various parts of England are being priced out of the government scheme which is supposed to assist them to get on the first rung of the property ladder.
It has been reported in the Manchester Evening News that Manchester’s housing stock is in dire need of a boost.
The supply of properties for sale has slumped to alarmingly low levels, according to latest figures revealed by Home.co.uk.
May marked the start of the Japanese Knotweed growing season where the plant can grow at a rate of up to one metre a month.
Japanese knotweed (Fallopia japonica) was introduced from Asia to Britain in the 19th century as an ornamental plant. However, a lack of natural predators in our environment has resulted in its rapid spread across the UK. It is listed by the World Conservation Union as one of the world’s worst invasive species and is thought to cost the British economy £165m a year.
The ability to access the title to any property has increased incidence of property fraud in England and Wales.
Prior to December 1990, if the title to a home or other property was registered at the Land Registry it was not open to public scrutiny. Roll forward to today and the digitisation of the registered titles, has allowed registered titles to be opened to the public.
Our Residential Conveyancing Team at Myerson experienced a busy start to the year with clients wanting to complete their transactions before the Stamp Duty Land Tax (SDLT) rise came into force on the 1st April 2016. We reported in our blog Budget 2016 – Stamp Duty Land Tax Set to Rise that the government had confirmed its final policy design to increase SDLT by 3% on the standard rate for the purchase of additional residential properties that are not intended to replace a purchaser’s main residence.