Industry News: Residential Freehold Association objects to ground rent reform, unsurprisingly!

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Leasehold ground rent cap could invoke £30bn compensation bill – RFA

“The Residential Freehold Association (RFA), an organisation representing residential property investors, has said the proposal to retrospectively cap ground rent could lead to a potential compensation bill of up to £30bn.” Click to read original article >>>

The Residential Freehold Association, the body representing the interest of Freeholders in the UK has voiced its concern around proposals to reform ground rents. If you have tried to buy a leasehold recently you are probably aware that some leasehold ground rents are considered “onerous” if they will increase at a set rate and not linked to RPI or other standard metrics. The reason this is such a problem for mortgage lenders is because should the ground rent exceed £250 its classed as an AST, and therefore the freeholder has a right to reposes if payments are missed.

Despite ignoring the fact that on average across the country ground rents already average £298 a year, they cite the following issues:

  • Millions of long-term standard leasehold contracts were relied on by investors such as pensioners, charities and other institutions.
  • The RFA said this could make professional freeholders insolvent, and if this happened, building safety works would stop, insurance policies would be cancelled and housing quality would suffer.
  • As it stands, the government’s policy will not only do little to improve standards for leaseholders, but it will also have a significant impact on the state of public finances, which will inevitably be picked up by the taxpayer.

The Leasehold and Freehold Reform Bill is currently making its way through the House of Lords, with the report stage set for 5 June. 

Picture of Author: Stuart Phillips

Author: Stuart Phillips

Fully CeMap qualified, Directly Authorised by the FCA and with over a decade of experience, Stuart has a wealth of experience in both specialist BTL and residential mortgages.

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