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Choices

In 1988 Simon Shinerock had a vision of a new type of estate agency, one with a philosophy based on partnership, realism and trust, and where buyers, sellers, landlords and tenants could get all the services they needed under one roof.

With the opening of Choices first office in June 1989 Simon turned his vision into a reality. Today we operate from multiple offices in the South East of England and are considered one of the UK’s most successful estate agencies. We currently let and manage over 2500 properties on behalf of landlords and we arrange the sale of millions of pounds worth of property every week.

Choices Acquisitions and Investments are part of the Choices Estate Agency Group and began operations in July 2000.  We are committed to helping our clients achieve financial security through property by offering a complete property investment service on a nationwide basis. Our motto is to under promise and over deliver and to ensure our clients are better off with our help rather than going it alone.

In today’s society we believe that it is almost impossible to achieve financial security through work alone. We don’t think pensions are a practical solution for most people and we think that investing in stocks and shares is only for the rich and brave! We believe that property investment is the only practical way for most people to achieve financial security.

Our service is designed to help everyone who wants to invest in property, whatever their level of expertise and however much time they have available. Whether you are a seasoned professional, simply looking for a source of below market value property or you require a complete hands off portfolio building service so that you can get on with your life, we have a solution that is perfect for you.

 

Choices Today

At Choices we are proud to offer property investors a range of market-leading products backed up by a brand you can trust and an unparalleled level of expertise.

Choices Today is a weekly digital magazine dedicated to serious property investors with the very best quality information and articles, giving a unique insight into the property market. Our premium pages contain a whole host of unbiased content, researched and written by professional journalists. Here are a few examples of the kind of content you can expect from our online digital magazine delivered to your inbox every week;

  • Hard hitting interviews with leading industry figures
  • In-depth real life warts and all case studies
  • Fascinating reports on up and coming property hotspots
  • Analysis of overseas markets
  • The pro’s and con’s of buying HMO’s and Student accommodation
  • Exposes on the Magic Wand Strategies that don’t work
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  • How to buy at auction without paying too much or having a heart attack!
  • Unbiased down to earth book and property investment course reviews
  • Submit your own property investment question and get an expert answer

The Leasehold Scandal

12 October 2017 1922 Views

The Leasehold Scandal

With continued media interest in the unfair leasehold practices of some freeholders and ever-increasing queries from clients surrounding this point, I wanted to address this again.

In the past, property developers have built properties with a view of selling off the freehold for a substantial profit. This is how a considerable number of developers have made their profit from a development after selling the properties off at close to build cost. In order to achieve the high prices from a freehold purchaser that they needed in order to make this profit, the ground rent charges would be set with a multiplier that allowed them to sky-rocket over the period of the lease. In some cases this could be as significant as doubling every 5 years. The new owners of the properties have bought into these leases with little mention of the damaging effect this could have to the property price purely because it was common practice and solicitors wouldn't see this as out of the ordinary.

However, a number of years down the line and the ground rent is now at such a level that it puts off prospective purchasers and the leaseholders of these properties are stuck in a home that they can no longer afford to pay the bills of.

For example, let’s look at a situation whereby the ground rent started off at £250 a year doubling every 5 years. This means that after year 5 it becomes £500, then £1,000 after year 10, £2,000 after year 15 and £4,000 after year 20. This means that in the twenty years you have owned the property, the ground rent is now 1,600% higher than what it started off at. We can be fairly confident that inflation, or incomes, over the next 20 years won't increase 1,600% meaning that the ground rents become wholly unaffordable.

What is happening at the moment?

With increasing pressure from lenders, as we discussed in our blog on the 19th July, government are starting to intervene in what has become known as the "leasehold scandal". There are approximately 4.2 million properties which fall under leasehold in the UK and it is likely that a lot of these built-in the last few years will be directly affected by unfair ground rent multipliers. What is worse, however, is that this doesn't just affect flats but some houses were also sold off as leasehold including by some of the country's leading developers. The idea of leasehold houses makes sense in that it can protect the overall look of a whole site and stop one person ruining property prices throughout by not looking after their house. However, developers have sold off the freeholds and the new owners of these have implemented ever increasing ground rents. As such, the government are planning on banning the sale of leasehold houses completely and instead replacing it with a common hold. This includes an infinite freehold but with obligation to look after the common shared areas of either a development or a block of flats. If this is implemented in full then it would spell the end of freehold sales for large profits.

So what could happen if this is implemented?

In theory, if developers are unable to make their profits from selling the freehold of a development, either flats or houses, then there is a chance that they could pass this on to the purchaser and put house prices up. That being said, it is common knowledge through property agents and the media that the demand for properties at present has dropped considerably. Admittedly you could consider that this is down to the usual seasonal changes of the property market but it does appear that there has been a slowdown in the sale of properties throughout 2017. I would say, therefore, that the likelihood of this causing house prices to rise are somewhat limited but it has to be something to consider.

The other alternative is that some smaller developers will just not be able to make developments work and could end up going out of business. I do not like to see this happen but we have seen a number of developers over the years who are first time property developers and the product they produce is not at the standard you would expect. I would also suggest that it is some of these developers that have been the greatest exploiters of the unfair leasehold practices that we have seen.

Written by - Tom Stedman, Head of Property Sourcing at Choices Investments

The Leasehold Scandal

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