Act Now Before Planning Reforms Increase Costs

If you want to buy your freehold, it could become more expensive due to proposed planning reforms. Ringley Group MD Mary-Anne Bowring advises flat owners to start the process now before new planning laws come into force in September. The radical planning reforms announced this week could have unintended consequences for leaseholders.

New Planning Rules and Their Impact on Freeholders

On Monday, the Prime Minister announced changes to the planning system to make it easier to repurpose empty retail and commercial premises into homes. However, under the new rules, freeholders of purpose-built residential blocks will also be able to build additional space above their properties via a fast-track approval process. While this will require neighbour consultation, it could negatively impact flat owners looking to buy their freehold.

New Policy on Hope Value

A planning policy paper is expected later this month to reform England’s long-standing planning system, with changes anticipated by September 2020. One key issue is hope value, which factors into the valuation for leaseholders wanting to buy their freehold. Hope value includes the potential market value of land, roof, or airspace development rights based on the expectation of planning permission. The proposed legislation increases the certainty of this value, making it a crucial consideration in enfranchisement valuations.

How the Changes Affect Enfranchisement Premiums

With the proposed planning changes, the assumption that extra flats can be built on top of blocks will affect the enfranchisement valuer’s calculation of hope value. If all leases in a block are long leases (with over 80 years remaining), the enfranchisement premium is typically 20-25 times the ground rent, plus the present value of the freehold deferred by the lease term. Under the new rules, the certainty of hope value for buildings constructed between 1 July 1948 and 5 March 2018—due to the fast-track approval process—could increase the premium leaseholders must pay.

Structural and Legal Challenges for Leaseholders

Leaseholders may also face legal and structural challenges when attempting to buy their freehold. Some blocks may not have the structural capacity to support additional storeys, but proving this could be costly. The issue may end up being decided in court, potentially disadvantaging leaseholders. Additionally, freeholders of purpose-built blocks constructed during the specified period may delay creating roof space leases. This could further shift the balance of hope value, increasing enfranchisement costs.

Take Action Now to Secure Your Freehold

Given these upcoming changes, leaseholders wishing to buy their freehold should act quickly. Submitting a Section 13 notice before the law changes in September could help avoid increased costs. Ringley Law has extensive experience in enfranchisement and can advise flat owners on the best course of action. You can also read our guide to buying your freehold here or explore our Freehold Enfranchisement e-book. For more information, visit www.ringley.co.uk.