Cabinet Reshuffle Delays Ground Rent Ban … ?

When Sajid Javid announced on 21st December 2017 the government’s intention to ban ground rents on houses and all new flats, I emailed everyone on my database. A month or so later I emailed again to express concern that Sajid Javid was one of those rare MPs who actually does something. Well, that positive trait has got him noticed – and today he was moved to the Home Office, replacing Amber Rudd who resigned a few days ago.

See the full reshuffle results here >

So what does this mean for ground rents?

Well hopefully, the new Housing & Communities Minister; James Brokenshire will take a while to get to grips with his new department and all the unfinished business left by his proactive predecessor. That will hopefully delay the process of preparing the Bill … and then the Act … which is needed to bring about the proposed change. Add to that the continuing Grenfell Tower fallout … and Brexit … and we may not see change for a couple of years.

Whilst the government’s intention is to “ban ground rents” Sajid Javid did not clarify whether this would be a ban on all ground rents … or just new ground rents. My intuition tells me it will not be retrospective. Banning ground rents on existing leases will create all sorts of Human Rights issues and will only serve to make lawyers and barristers rich. But banning ground rent on new leases will create a level playing field with Commonhold – the alternative property tenure which never took off following its introduction in 2004. If new developments have no ground rent – the developer does not have a valuable freehold asset to sell … and therefore he/she might be tempted down the Commonhold route (which the government would applaud).

With all that in mind, my developer clients are full steam ahead – getting leases optimised and exchanging on freehold sales as urgently as possible. The reshuffle may delay matters, but that delay is by no means certain – so best to play safe and get new leases registered at HMLR sooner rather than later. Busy times for me therefore – and I’m not complaining.

Best wishes.

Bernie Wales

P.S.  If you haven’t watched my short video on maximising freehold value, look here >

or here >

Regulation for Managing Agents

Way back in 2002, and in response to the then Government’s consultation ‘Improving the standard of residential leasehold management’, the Leasehold Advisory Service; LEASE said: “From research, elsewhere (France and Australia) it is clear that a licensing system is fully achievable, acceptable by the industry and effective in regulation of standards. It is clear that this is the ideal, which should be pursued.”

16 years later today’s government has published its intentions in a 33 page document:


In summary, the government intends to:

  1. Extend the previous commitment of regulating letting agents to include all managing agents – to protect leaseholders and freeholders alike;
  2. Create an independent regulator, covering letting and managing agents;
  3. Create a single, mandatory and legally enforceable Code of Practice for letting and managing agents;
  4. Require letting and managing agents to have a nationally recognised qualification to practice. Agents will also be required to undertake continuing professional development;
  5. Propose that criminal sanctions will be imposed on agents who practice despite not meeting minimum standards;
  6. Empower leaseholders to switch managing agents where they perform poorly or break the terms of their contract; and
  7. Simplify the Right to Manage process for leaseholders.

Now, governments have a habit of saying lots and doing little. But Sajid Javid, Secretary of State for this area of government, has a habit of doing what he says he’ll do. I have no doubt therefore change is upon us – and that’s good for the industry – and good for leaseholders too. I welcome it and I hope it’s sooner rather than later.

Best wishes.

Bernie Wales

Ground Rents Update

On 21st December 2017, I emailed my subscribers to notify them of the government’s intention to ban ground rents. This unexpected announcement by Sajid Javid, Secretary of State for Communities and Local Government, sent shockwaves through the freehold buying community … and raised cheers from the #leaseholdscandal brigade, who had been calling for leasehold reform in the wake to the “Taylor Wimpey Leasehold Houses” debacle.

Whilst support for leasehold reform has been gaining momentum since the Grenfell disaster last summer – no one expected politicians to actually do something whilst Brexit is demanding so much attention. But Sajid Javid seems different from your average Minister – he does what he says.

Having said that, the surprise announcement did not include a timetable for reform. It said there is an intention to ban ground rents – but didn’t say when. Nor did it say whether existing leases will continue unchanged – which would create a ‘two tier market’ of flats with ground rent and flats without. It’s all a bit unsatisfactory and raises more questions than it answers.

The government’s long-term objective is clear. Ban ground rents and thus create a level playing field for Commonhold – the alternative form of tenure which was introduced in 2004 and never took off. If ground rents on new developments are banned, the value of the freehold is virtually wiped out – thus making commonhold a viable alternative.

So, where does this leave us now?

Well, the new year brought a tsunami of reaction from freehold buyers and developers alike. Buyers hurriedly instructed their solicitors to abort purchases where they hadn’t yet exchanged. Developers panicked as they saw a chunk of their bottom line profit evaporate through no fault of their own. And both sides emailed and called wanting me to wave a magic wand of some sort. It’s been trying!

It will take a while for the dust to settle, but things a starting to clear a little … and we’re seeing two distinct camps form.

Firstly, there are the large pension fund and bank backed institutional buyers. These guys have aborted everything they can. They are nervously quivering as their numbers don’t add up anymore and everything they paid 35YP for last year no longer makes any sense – particularly if existing ground rents are retrospectively banned too. They have effectively closed their doors until the government passes the new legislation. Job losses are looming large.

Secondly, there are the old established family firms, the orthodox Jewish landlords and those who have worked with freeholds for generations. Unlike the financial guys, these chaps understand the leasehold world thoroughly. They’ve seen property cycles come and go – they’ve seen boom and bust – and they’ve been frustrated in recent years by the crazy high multiples that others have been paying. This has meant they’ve not been able to buy at the levels that have made sense for years – and consequently their cash reserves have grown. These guys see an opportunity.

As I said, it will take a while for the dust to settle. At present the market is flooded with aborted deals – in addition to those developments that were coming to market anyway. There’s an over-supply … and much of the demand has gone. That’s causing a correction in the market and prices are falling. And alongside that, the few buyers that are active – are very active. They’re overloaded at the moment and consequently they’ve got very little patience. If a seller is not proactive and pushing their sale forward – the buyers are dumping them, putting the file to the bottom of the pile and starting on the next one. There’s no time for time wasters!

These are interesting times. The biggest change to property law in a century is coming along. That will be good and it is to be welcomed. It would just be nice to know when it’s all going to happen.

Meanwhile, I’m dusting off my Commonhold ebook. I suspect it will start selling again soon

Are You Near Exeter on 22nd October?

Are you near Exeter next Thursday; 22nd October?

If you are – or if you can travel down to that part of the world – come and see my presentation to the Property Investors Network.
Click here for details.

I’ll be talking about the two biggest subjects people pay me to teach them about.

Firstly, I’ll be explaining about ‘short leases’ and what you do about them. Owners and buyers of leasehold flats can lose £000s if they don’t know the system – and freeholders will rip them off, big time. But there are simple things you can do to make sure you get a good deal. I’ll teach you all about it – with no legal gobbledigook.

Secondly, I’ll be explaining the other end of the scale – brand new leases and how you can maximise freehold value. All you have to do is remember ‘shaving foam’. Yes, shaving foam. It sounds crazy – but remembering it will make you extra £00,000s on your next title splitting project. Again, no legal jargon – just simple, no nonsense education and tips.

Seats have almost sold out – so click here now to book your place. And if you’ve never been to a pin meeting before, use voucher code WALES and I’ll pay entrance fee.

I look forward to seeing you there.

Best wishes.

Bernie Wales

Bernie Wales says RTBL. Watch this video to see why.

Hello, my name’s Bernie Wales and I’m here to give you a short video with some advice which generally would solve 99% of leasehold problems.

I get people visit my website and book up 15 minute slots because they have a problem and they want advice to do with their leasehold flat, or their block of flats, or the management thereof. And in 99% of cases they have the answer themselves if only they knew where to look.

And my motto is RTBL – Read the Bloody Lease!

In the world of flats and leasehold, the lease is the rulebook; it gives you the rules by which the freeholder has to behave, the leaseholder has to behave and, if appropriate, the management company as well. It’s all the dos, the don’ts, what you must do and what you mustn’t do.

And, if you read that lease, then nine times out of 10 you can get the answer to what your problem is. Or a pointer that will take you to where the answer is.

Now don’t be intimidated by it. Yes, leases are long, boring documents; they’re written by lawyers, they have some legal gobbledygook in there but, if you calmly look through it with your problem in mind, you’ll tend to find that the sections that you need will jump out at you, particular words will jump out at you, and if you look at those it will give you a hint.

Hopefully you’ll find your answer. If not, then go to my website – – book up a 15 minute slot, send me the lease and I’ll be glad to find the answer for you.

So, thank you for watching and I look forward to speaking to you soon.


Short Lease – Buying From A Dead Leaseholder

I recently had an enquiry from an investor who was looking at buying a flat with a 70 year unexpired term on the lease; a short lease. The leaseholder had recently died and his mum and sister were selling the flat.

Here’s what I advised.

Further to our discussion, I attach the Freehold and Leasehold titles which I downloaded from Land Registry .


You’ll note the freeholder is Mr C. This might be good … or bad … because an individual may not know the extension process and may agree a good deal … or the individual may be scared by the process and refuse to talk. But at least it isn’t one of the institutional landlords, who would give you a hard time on the extension process.

The leaseholder is Mr A.  You indicated that he has died – but this doesn’t change the fact that he is the leaseholder. He will remain the leaseholder until the lease is assigned to a purchaser. I suspect therefore the mother and sister are dealing with the flat as executors, rather than new leaseholders – as no change of ownership has been registered at Land Registry.

I suggest your course of action should therefore be (provided the deal is a good deal and meets your criteria):

  • Agree to a conditional exchange;  conditional upon i) the leaseholder/executors signing … and satisfactorily serving … your Section 42 Notice, and ii) with a delayed completion (see below)
  • Once the Notice is served, you take over the negotiations with the freeholder – and agree the terms for the extension of the short lease
  • Complete the lease extension and the purchase on the same day, with your mortgage attached to the extended lease

As we discussed, the leaseholder has not owned the flat for two years. According to the title document he purchased on 12th February 2013, registered 18th March 2013. Consequently the leaseholder cannot force the freeholder to extend (via the Section 42 route) until after 12th February 2015. You may therefore need to revise the above to:

  • Agree to a conditional exchange, with a delayed completion
  • Agree a “Licence to Occupy” allowing you and/or your tenant to occupy the flat until completion
  • Pay a monthly Licence Fee to the leaseholder – to cover the ground rent, service charge, etc
  • Let the flat on a similar Licence to your ‘tenants’
  • Informally negotiate with the freeholder to see if a commercial agreement can be reached on the extension
  • If necessary serve the Notice and then formally negotiate with the freeholder – and agree the terms for the extension of the short lease
  • Complete the lease extension and the purchase on the same day, with your mortgage attached to the extended lease
  • Terminate the Licence with your ‘tenants’ and replace with an Assured Shorthold Tenancy

A note of caution : Check the current mortgage (if any) allows for the flat to be let out.

When negotiating with the freeholder remember:
The Section 42 process provides for a 90 year extension to the present short lease term … and the ground rent reviewed to a peppercorn … for the calculated premium

  • You may not need +90 years and could therefore agree a shorter extension for a lower premium (perhaps just extend to 125 or 99 years)
  • You may be prepared to pay a ground rent; say £300pa. This would add to the capital value of the freehold (by roughly 10x the ground rent) so negotiate an appropriate further reduction in premium; e.g. £300pa G/R … £2,000 reduction
  • Finally, doing a commercial deal now will put money in the freeholder’s pocket NOW, not in six months’ time.

Lastly, remember you are required to pay the freeholder’s reasonable legal and valuation costs – once the Section 42 Notice has been served and you’re forcing the extension of the short lease. Allow £2,000 or so … and a similar amount for you own fees.

Having read this article, if you have a short lease query – or a general leasehold query – and need some advice, click here to book a 15 Minute Quick Consultation

What Are The Ballpark Costs To Extend The Lease?

I recently had a leasehold enquiry from a property investor looking at lease extension possibilities.

He told me:
I have come across a property in Reading – 26 Topnotch Court which is up for sale at £130K through an estate agent who makes it as difficult as possible to get in touch and talk to the owner. (Not just this property but in general.)

So far I know it has 65 years to run. The freeholder is Topnotch Developments Ltd. The service charge now is £90 per month and the ground rent is £70 per year.

I have been trying to get the term and dates of the lease, the original ground rent, review dates etc but I am being met by a stone wall. The estate agent claims that the owner is refusing to get this as Topnotch want to charge £1000 for this info.

I suspect if this had an extension this property would be worth about £150K.

My preliminary questions are 1) is it worth pursuing, 2) can you tell from this the ballpark costs to extend the lease? 3) is it worth paying money to Topnotch to find more? 4) What do you think?

My reply was as follows:

1) is it worth pursuing? I don’t know, that depends on whether this property fits into your investment strategy.

2) can you tell from this the ballpark costs to extend the lease? I could have an educated guess – but not all the facts are confirmed.

3) is it worth paying money to Topnotch to find more? I wouldn’t pay £1,000 to find out the lease details and have them clarify their view of the lease extension price. I would:

  • Download the leasehold title from HM Land Registry for £3 to clarify the lease term and date, and the original ground rent. I suspect it will say £35pa … and if it is a 99 year lease, then the original ground rent will have doubled after 33 years to £70pa … and will double again after another 33 years to £140pa.
  • I would then enter the information here : to get an initial ballpark figure for the extension premium
  • And here too : and then I’d compare the two
  • I’d then research on Zoopla, or wherever, to see the sold prices within Topnotch Court – looking for the price of unextended flats … and extended flats (to check your £20k margin)

What do you think? Once you’ve gone through that process, I think you’ll find the extension premium is likely to be £10k to £12k (for the full 90 years and peppercorn ground rent), to which you need to add the landlord’s legal and valuation costs (£1,500 to £3,000) and your own legal and valuation costs (similar). So you might be looking at a project cost of £148k at the top end, before any other costs such as repairs/refurbishment.

But it all depends what your strategy is – and what you’re intending to do with the flat.

Think of a lease extension as “cream on the cake”. You need to ensure the cake tastes good first; i.e. there needs to be a good reason for buying the flat in the first place – and then use a lease extension to overcome the mortgage barrier, etc.

I hope that helps.
Best wishes.
Bernie Wales, FIoD, FIRPM, AssocRICS

If this article interested you, find out more about short leases and lease extensions here >


“Final and binding” service charge … may not be

The case of Windermere Marina Village Ltd v Wild and others [2014] UKUT 163 [LC] was recently decided in the Upper Tribunal. It looked at a common phrase seen in residential leases, namely that “ the determination by the Landlord’s surveyor shall be final and binding”. The decision said that that wording was void under s27A[6] of the Landlord and Tenant Act 1985.

It is quite common for leases to say that the service charge expenditure should be apportioned between the various leaseholders as determined by the landlord’s agent or surveyor. It is also common for those leases to say that in the event of a dispute his/her determination would be valid and binding upon the parties.

In this case, the leaseholders contested the situation and the Upper Tribunal found in their favour. Which means … the First-tier Tribunal (Property Chamber) now has jurisdiction to substitute its apportionment in place of that determined by the landlord’s surveyor – and to override the provisions of the lease.

So what does this mean for the many landlords – and managing agents – who manage under leases with such a wording? Well, firstly they need to ensure they follow current guidance on such matters – and ensure their determination is fair and equitable in the circumstances existing at that specific property. In smaller residential properties that might be reasonably easy and obvious – but in larger mixed use developments, with flats and shops and offices, the task will be much harder as there are often several views about who benefits most from specific services.

How long will it be before the First-tier Tribunal is flooded with cases questioning “final and binding”?

Case details here >

Freehold Title Splitting – Where Do I Start?

My Telephone Consultation Service tends to keep me fairly busy with all kinds of questions to do with my area of expertise.  This time the question was about how to get started down the road of freehold title splitting. Here’s what I had to say;

Dear ?????

Thank you for your questions about getting started down the road of freehold title splitting … and the main things you should be considering.

Sourcing suitable properties can be time-consuming, especially if you let estate agents send you details of every large property they have on their books. You really need to be clear about exactly the type of building you’re interested in – and reject everything else they send … explaining why, so they hopefully learn for next time.

Rather than approaching estate agents, I would suggest contacting lettings agents instead. Ask them if they have any ‘tired landlords’ or retiring landlords on their books – particularly where the landlord lives in part of the property. The properties they show you will most likely be interesting and if you’re really lucky you’ll find buildings which are presently one freehold building, but which have been physically split into several flats. These are ideal because there is limited building work to do – although you will have to check that they meet Building Regulations and have Planning Permission … even if the landlord says they comply and have been signed off.

The other advantages of such situations include the landlord probably not needing to sell in a hurry. This opens the possibility of an option, or a delayed completion, or a joint venture. All these methodologies have advantages for your cash flow – and when you add the fact that the landlord already has tenants in the property … you’re on a winner as you’ll have cash flow from day one.

Buying the property has a number of considerations. You’ll probably need commercial finance, a bridging loan or … best of all … private funding. Whichever route, get started on the ‘vetting process’ now, as it can take many weeks to complete. Better to have the funding ready but no property, rather than the other way around.

But make sure your lender understands your business plan and in particular the fact that you’re going to be ‘slicing’ their security and selling it off bit by bit (in most cases). Make sure you have a clear agreement on how flat sale proceeds will be distributed – some to the lender and some to you, so that all are happy.

Also consider whose name the property should be in. Usually it’s best to buy the freehold in a company name – as with most ‘trading’ activity. Retain any flats you’re keeping in your personal name – as with most ‘buy and hold’ property investment. But you should check your particular tax circumstances with your accountant – well in advance.

Using my “Shaving Foam Technique” (see note below) create the leases in such a way as to maximise the residual freehold value. This will maximise your selling price for the freehold after the flat leases have been created – but if you’re hanging on to any flats long-term, make sure you don’t shoot yourself in the foot with onerous lease clauses. And if you need help finding a freehold ground rent investor, you know where I am.

If you haven’t seen my presentations on ‘The Shaving Foam Technique’ you’ll be interested in my Leasehold Home Study Course.  This will also give you a good understanding of leases and leasehold generally – which will save you a fortune by avoiding costly errors. Find out more here >

Ultimately, there’s a lot to know when it comes to freehold title splitting but it does open a very big door to some very good opportunities.

Best wishes.

Bernie Wales

My FREE Download – Perfect if You’re Selling a Flat With a Short Lease

I’ve just released my latest FREE download, which I’ve written to help people faced with a specific issue that more and more have to face … selling a flat with a short lease. No-one looks back on that awful moment when their Estate Agent tells them that they have a Short Lease with anything other than gloom. But hopefully this FREE download will change that for you.

My FREE guide’s called, quite simply, “What To Do When Your Estate Agent Says You Have a Short Lease”.

What To Do When Your Estate Agent Says You Have A Short Lease CoverAt the end of the day, property can be a precarious business – and this is no more so, than when selling a flat.

Flats are almost always leasehold, which means that you don’t own – and are not selling –  the flat, at all. You’re simply selling the right for your buyer to live there for a pre-determined period of time – and the purchase price they pay is buying them the Lease – which entitles them to rent the flat … for an awefully long time.

This is an important distinction that most property investors (and home owners) simply don’t understand. More importantly, they don’t appreciate the legal differences between freehold and leasehold and the implications that this and having a Short Lease can have.

If you’re selling a flat and your Estate Agent turns around and says that you have a ‘Short Lease‘, you need to know what that means, you need to understand the implications it carries with it and you need to understand what you should be doing about it.

My latest  FREE Download will put you in the picture, explain what this all means, what the implications are and what you can do about it. So, just complete the form below, to get your FREE copy of;

What To Do When Your Estate Agent Says You Have A Short Lease

I’ll also keep you updated with the latest news from the world of leasehold property targeted, specifically, to help property investors generate more profit, more often in more creative and less competitive ways.