New Transparency Rules & Ground Rent Charge Changes Are Happening!
Hello Readers,
It’s legislation time again! Seriously, even as an estate agent, I find it difficult to keep up with all the changes that are happening. There are two big changes taking place over the coming months and I thought I’d give you an update on them here:
New Transparency Rules For Property Listings
From the end of May, it will be a requirement to include some additional information when listing a property.
Portals such as Rightmove and Zoopla will be rolling out updates to cover these off and the headline is how sellers will be required to include ‘material information’ including:
Where this information is left off, it will be flagged so consumers can see what’s missing and there will be a link outlining where they can find this information.
This begins what is proposed to be a three-phase rollout, with phases B and C yet to be announced in detail. Additional information to be added will include things such as restrictive covenants, flood risk and other specific factors that may impact certain properties.
Here’s a summary of the phases (timelines for phase B and C are yet to be announced).
Part A
Information that, regardless of outcome, is always considered material for all properties regardless of location. This information generally involves unavoidable costs that will be incurred by the occupier regardless of the use of the property.
Part B
Information that must be established for all properties. It applies mainly to utilities (and similar), where non-standard features would affect someone’s decision to look any further at that property.
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Part C
Additional material information that may or may not need to be established, depending on whether the property is affected or impacted by the information. Applies to properties affected by the issue itself because of, for example, the location of the property.
I have been doing some reading around this and came across a piece of research by Censuswide where just over 1,000 respondents who have moved in the last 3 years or are looking to move in the next 3 years were surveyed. Of these, more than half of respondents (54%) said that they would be less likely to buy or rent a property where information was missing on the property listing and 41% of respondents assumed that missing information means something must be wrong with the property.
As investors, we know all too well the pains of the unexpected during the conveyancing process and with around a third of house sales falling through, having as much information upfront as possible will certainly make a big difference.
Will we see a change in the conveyancing process I wonder? For example, in order to provide accurate key information such as restrictive covenants and flood risk outlined in phase B, there would probably need to be some form of search carried out.
Getting legal advice before purchasing an auction property is something I generally recommend, so I wonder if we will see similar for every house sale (and whether this would increase the cost in relation to legal fees). I’d be keen to hear what you think!
Ground Rent Ban
When it comes to the cost of housing in the UK, I’ve recently read that asking prices have continued to soar, with an increase of ￡5,537 over the last month alone (probably no surprise given the level of demand compared to the supply)!
Well, it’s time to get used to a new rule around ground rents. I first wrote about this back in January 2021 and it appears to be coming into force (at least in part) from the end of June. The change is that from 30th June, anyone buying a home on a new long lease will be freed from annual ground rent costs.
There are future measures yet to come into place such as the right for leaseholders to extend their leases to 990 years at zero ground rent along with the implementation of an online calculator to help leaseholders find out how much it would cost to buy their freehold or extend their lease.
There is one question yet to be answered, however, as the change only applies to ‘new, qualifying long residential leasehold properties.’ I cannot seem to find any information on what qualifies as a long, residential lease!
I’ll be interested to see if this change has any impact on the overall cost of purchasing a leasehold property! I think that if it does, it’s likely to be marginal.
I’d be really interested in your opinion on these two changes. It’s interesting that they haven’t been all that widely publicised, but they are quite significant!
Hasan