Residential Newsletter - Spring 2021

Residential Newsletter - Spring 2021

Meet the team: Claire Yarrow

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1. How long have you worked at Freeths and why did you decide to join the firm?

I have worked at Freeths since March 2019. I decided to join the firm as I wanted to work for a national firm with an excellent reputation.

2. Why did you choose to specialise in Residential Conveyancing?

An opportunity arose to work in Conveyancing when I was starting out in my law career in 2007 and I’ve worked in this area ever since. I enjoy helping people with their property transactions and there is, usually, a happy client at the end of the matter, even if they may not always seem that way during the process! No two transactions are ever the same. Often there is an element of variety, so, I find I am always learning something new and developing my skills. Whilst some transactions are more challenging than others, there is something positive to take away from each job.

3. What has been the most complicated transaction you’ve been involved in during your career?

There have been a few! Recently, I advised on an investor purchase of a new apartment involving Option Agreements (an agreement for the option holder to buy the land at a later date, subject to specific terms) and Pre-Emption Agreements (an agreement for the seller to have a right to buy in priority to any other buyer when re-selling). Sometime after completing the purchase, the client contacted me to say they thought they had completed on the wrong unit (not a Freeths error, I hasten to add!) It transpired that the developer (seller) had renumbered some of the units very early in the development process but had failed to make its solicitor aware of the changes. The owner of the other flat involved agreed to the “swap”, so far so good, the more complicated part of the process was the conveyancing procedure needed to rectify the issue! 

4. If you could have a meal with anyone, alive or dead, who would it be?

Olivia Colman. I think she is an amazing actress and appears to be very down to earth. It would probably be really good fun to have a meal and a drink (or two) with her. Also, I bet she has loads of great stories and juicy gossip!5. Tell us an interesting fact about yourself.I may be the only person in the world who hasn’t watched Game of Thrones!

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Leasehold reform: the Government announces its roadmap

In the Autumn/Winter edition of the residential newsletter, we considered the Law Commission’s proposals to reform leaseholder’s rights and ownership of leasehold homes. Whilst the proposals were widely welcomed, real change required governmental action.

In January 2021, the Government announced its proposed changes in a press release. Heralded as “the biggest English property law reforms for 40 years”, the changes will be introduced in stages. So, what does the leasehold reform roadmap look like? The plan is to introduce the changes in “two-part legislation”. We have a timetable for the first part, namely the next session of Parliament, but no definitive timetable for the second part. The first part will set future ground rents to zero so, “any leaseholder who chooses to extend their lease on their home will no longer pay any ground rent to the freeholder”. This legislation will also apply to retirement properties; although this provision will be deferred for 12 months from the date the legislation receives Royal Assent. It is not surprising that ground rents have been singled out for immediate action as “[u]nder the current law many people face high ground rents, which combined with a mortgage, can make it feel like they are paying rent on a property they own”. The second tranche of legislation is expected to introduce wide ranging reforms including:

• Introduction of a right for leaseholders of houses and flats to extend their lease, “as many times as they wish, for a term of 990 years at zero ground rent”. This will abolish the current two-tier system that applies different rights and extension periods to flats and houses;
• The ability for  long leaseholders to buy out their existing ground rent without being required to extend the term of the lease;
• Abolition of high lease enfranchisement costs by amending the valuation process to calculate the cost of extending leases or buying freehold, for example, by prescribing rates for calculations at market value and abolishing ‘marriage value’ (the increase in the value of a property following a lease extension). The Government will introduce an online calculator allowing leaseholders to work out enfranchisement costs, as well as ensuring payments are standardised and fair across the market.

What about commonhold?

In its 2020 report, the Law Commission recommended reforms should be introduced to reinvigorate commonhold as a workable alternative to leasehold, for both existing and new homes. Commonhold has a number of benefits when compared with leasehold, not least enabling flat owners to hold the freehold of their property and jointly manage the common areas and services of the multi-occupancy building. The Government has now announced that it will establish a Commonhold Council. The Council will be a partnership between the Government, industry parties and leasehold groups with the aim of preparing “homeowners and the market for the widespread take-up of commonhold”.

Next steps

From the Government’s point of view, the package of measures it has announced is only part of its response to the Law Commission’s reports. It plans to respond to the Law Commission’s remaining recommendations on enfranchisement, commonhold and right to manage in due course. For now, we all await sight of the draft legislation relating to ground rents. Developers, leaseholders and conveyancers alike will no doubt be reserving judgment until they have scrutinized that. The road ahead looks likely to be a long one. If you would like to discuss any of the areas discussed in this article, please get in touch with the Residential Property team.

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Budget 2021: Extension to stamp duty “holiday”

Following numerous rumours, the Chancellor used the 2021 Budget to confirm the stamp duty land tax (SDLT) “holiday” for residential properties will be extended.

This means residential property buyers who purchase a home before 30 June 2021 will not pay SDLT on the first £500,000 of the purchase price, with SDLT payable on the amount paid above this. The nil-rate SDLT band will then revert first to £250,000 until 30 September 2021, and then the usual £125,000 from 1 October 2021.If you would like to discuss the SDLT holiday, please get in touch with the Freeths tax team.

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Defective cladding: the story continues…

In the Summer 2019 edition of the newsletter, Kristal Dale looked at the potential issues faced by private sector occupiers who live in buildings blighted by defective cladding.

More than three years on from the Grenfell Tower disaster, significant pressure continues to be put on the Government to address the issue of replacing combustible cladding on high-rise residential buildings. We now appear to have a little more clarity about the main question, “Who will foot the bill for that work?”

In February, the Government issued a press release announcing an extra £3.5 billion of funding on top of the £1.6 billion of funding it had previously assigned to replace unsafe cladding. The press release also makes mention of a five-point plan the Government is introducing with the aim of providing “reassurance to homeowners and bring confidence to the housing market.” The plan sees the Government paying for the removal of unsafe cladding in all residential buildings 18 metres and over (six storeys) in England. Those leaseholders who live in buildings between 11 and 18 metres high (four to six storeys) will benefit from a “generous finance scheme”. Rather controversially in the eyes of many, the bill for this is due to be met, in part, by the introduction of a new tax on the UK residential property development sector. Due to commence in 2022, this tax seeks to raise £2 billion over the next decade. Bearing in mind that several developers have already sought to deal with cladding issues in buildings they have constructed voluntarily, how this new tax will be administered will be scrutinised closely by many interested players. The potential impact this tax will have on the Government’s agenda to build lots of new homes in the coming years also remains to be seen. If you require further advice on this, please contact Kristal Dale in our Residential Property team on 01865 781 007 or by emailing [email protected]

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The Core Residential Team

If you require further advice on matters covered in this or previous editions of our Residential Newsletter, please contact a member of our residential team.