First Time Buyers Club

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You cannot open a paper or turn on the news without mention of housing in some context or other. For the residential professionals 2017 will herald a new Housing White Paper and this is eagerly expected. The Law Commission are looking at leasehold property and engaging with the profession as to areas needing improvement or change. There is also no shortage of initiatives to aid the first time buyer and this is really exciting.

For any first time buyer the prospect of getting on the housing ladder is exciting but equally scary and challenging. The Government is certainly focused on how to aid and deliver housing stock that will facilitate your first step. The latest initiative sees a commitment for developments of houses only for first time buyers. It is essential of course that the first time buyer is equipped with all the knowledge they need to be able to take on the commitment of owning a home with eyes wide open and aware of your liabilities and responsibilities.

For housing estates it is increasingly common to find they are sold with leasehold tenure. This means you own the property for a term of years under a contract called a lease which provides specific obligations and liabilities. The reasons for this can be many fold. It could be because the estate roads and land remain private with the houses and need maintaining therefore the leasehold facilitates the governance and management of those areas; it could be because the developer owns the land leasehold or it could just be that the developer is wanting to sell the ground rent income stream as well as selling the houses. This can be a lucrative source of income for the developer.

Whatever the reason if you buy a leasehold house it is worth preparing yourself to understand your rights and responsibilities. It is always worth doing this but especially with houses because the landlord and tenant legislation that exists generally does not offer as much protection for leasehold houses as it does for flats. For example if you have a leasehold house you cannot challenge the service charge at First tier Tribunal for reasonableness which you can with a service charge for a flat.

If leasehold houses are to continue to multiply then there needs to be some form of action from the Government with regard to legislative governance. For example it would be very easy to remove all residential statutes and put in a place a single Act which covers all the existing provisions that are operable. Over the years as legislation is layered on top of itself parts of Acts become redundant and parts of Acts become superseded. Therefore a consolidating Act would put everything in one place and remove a heap of statutes from the legislative books. A consolidating Act would also facilitate the extension of provisions to cover houses as well as flats and thereby affording leasehold house owners protection.

There is always Commonhold that could be promoted for houses with estate management. It is generally considered that the current legislation from 2002 is flawed and needs amendment to make it work. It would also require a wide ranging education process to ensure that all areas of the residential market understands the tenure type. At present there are only around 16 buildings held in Commonhold. Mortgage companies do not understand them and are reluctant to lend on them, estate agents see them so rarely they do not appreciate what it offers.

The need for educating the market should not preclude the use of Commonhold but without parliamentary intervention it will be hard to see its wide spread use. Especially as developers have the option of selling the ground rent income stream that leasehold can offer.

Consistent professional standards in property management is the other part of the jigsaw that is needed. An organisation called ARMA (Association of Residential Managing Agents) are doing good work in professionalising the residential property managers however they only account for around 25% of the market place. Anyone can set up as a managing agent without any knowledge, controls, or professional indemnity insurance. When service charge monies collected from a site can amount to hundreds of thousands of pounds then it is worrying. I do not know of any other industry or profession where the public’s money is taken without the need for control or regulation. Therefore whilst parliament generally dislikes regulation and has eased a lot of controls over the last couple of decades it would be sensible to see regulation introduced in this arena.

As we move through 2017 and you first time buyers are wooed and courted and seduced by estate agents and developers to fill the homes coming your way, perhaps a thought or two on what do I need to know? How can I best educate myself? Of course the guides on the Leasehold Advisory Service website are always there to help and educate.

Roger Southam

Non Exec Chair Leasehold Advisory Service

7 January 2017

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