Starmer's vision quest

[briantrumpet]

That's the proposal and some freeholders will make a loss.

A case of "The value of investments can go down as well as up."

 

[C R]

From a different thread: (but discussion more relevant here)

I wonder how this £250/yr will work for existing leasholds where the groundrent is already above that threshold. Existing leasholds were established on a given financial bases eg lower purchase cost for higher ground rent. So so retrospectively in effect void that contract would seem unreasonable on the leaseholder.

In effect it would be a retrospective change for some leases.

The freeholders only have their greed to blame. Conditions like ground rent doubling every ten years were self evidently not sustainable. Management companies and their fee schemes are in the same boat. Capitalism eating itself.

 

[BoldonLad]

The freeholders only have their greed to blame. Conditions like ground rent doubling every ten years were self evidently not sustainable. Management companies and their fee schemes are in the same boat. Capitalism eating itself.

Quite. Management fees are the new rip-off

 

[Psamathe]

That's the proposal and some freeholders will make a loss.

A case of "The value of investments can go down as well as up."

Depends on the investment eg a fixed 1 yr savings bond and it's a legal contract and value cannot be changed once agreed. Variable interest and amount can vary. Stocks and shared, etc.

But in the case of leasehold it's a fixed legal contract agreed by both parties so not subject to such fluctuations (ie both pasrties knowingly agreed the terms).

 

[Pross]

Quite. Management fees are the new rip-off

At least they come with a contractual requirement to provide certain services (or should) e.g. on new housing estates they will cover maintenance of landscaping, play equipment and drainage infrastructure that fall outside the areas adopted by public authorities.

 

[Psamathe]

The freeholders only have their greed to blame. Conditions like ground rent doubling every ten years were self evidently not sustainable. Management companies and their fee schemes are in the same boat. Capitalism eating itself.

Some time back when the ideas were first being discussed, it was raised that some leaseholders had reduced the purchase prices of properties with higher ground rent prices ie in effect "lending" money to the purchaser in that they pay less upfront and more over time.

A valid counter argument would be the purchaser being greedy paying less for their property ...

I always feel very uncomfortable about retrospective changes where contracts were knowingly agreed and entered into by both parties.

 

[PurplePenguin]

Depends on the investment eg a fixed 1 yr savings bond and it's a legal contract and value cannot be changed once agreed. Variable interest and amount can vary. Stocks and shared, etc.

But in the case of leasehold it's a fixed legal contract agreed by both parties so not subject to such fluctuations (ie both pasrties knowingly agreed the terms).

It's called change in law risk and it applies to every investment. It supersedes any contractual obligation two parties have.

You can try to include change in law provisions within a contract, but the risk still remains.

 

[C R]

Some time back when the ideas were first being discussed, it was raised that some leaseholders had reduced the purchase prices of properties with higher ground rent prices ie in effect "lending" money to the purchaser in that they pay less upfront and more over time.

A valid counter argument would be the purchaser being greedy paying less for their property ...

I always feel very uncomfortable about retrospective changes where contracts were knowingly agreed and entered into by both parties.

I agree on the retrospective part. However, there are indications that it may not have been that clear what the long term implications of the ground rent conditions might have been. It is likely that we could be looking at another financial product misseling scandal.

 

[Psamathe]

It's called change in law risk and it applies to every investment. It supersedes any contractual obligation two parties have.

You can try to include change in law provisions within a contract, but the risk still remains.

But then in effect it's unwinding the contract so the freehold holder should have the option to void the original contract as the contract is not one they would have agreed to.

Such retrospective changes can cause loss of confidence in the system of contracts eg if a contract failed to pay teh agreed return the holder migth end-up bankrupt through no fault of their own. Private individuals could lose their houses when return on fixed investment just doesn't pay so they can't pay ...

What makes me uncomfortable about such changes is that the leaseholders freely entered into those contracts after taking professional/legal advice.

 

[Psamathe]

I agree on the retrospective part. However, there are indications that it may not have been that clear what the long term implications of the ground rent conditions might have been. It is likely that we could be looking at another financial product misseling scandal.

If mis-selling is involved then I'd expect that to be covered by existing legislation giving the purchaser grounds.

But buying leasehold properties people are taking professional/legal advice, probably the biggest purchase of their lives with long term commitments, not buying a discounted sofa from DHS on monthly payments. If the terms of the purchase were not acceptable they should not have purchased on those terms.

 

[C R]

What makes me uncomfortable about such changes is that the leaseholders freely entered into those contracts after taking professional/legal advice.

I have read that in many cases of new developments the purchase included the legal services and mortgage arrangements. It appears that in such cases the buyers may have thought they had received impartial advice, when in fact they hadn't.

 

[Psamathe]

I have read that in many cases of new developments the purchase included the legal services and mortgage arrangements. It appears that in such cases the buyers may have thought they had received impartial advice, when in fact they hadn't.

If there is a case on the basis of advice given then that should be covered by professional standards and existing legislation. Or new laws covering cases where inadequate advice was provided rather than a global cap (which impacts those who eg slod for lower purchase/higher ground rent basis).

When you purchase in France it's carrier out through a Notaire who doesn't act on behalf of either party. They make this very clear and make it very clear that if you want legal or financial advice you should seek your own.

Again a massive purchase not a DFS sofa so buyer would be being careful.

 

[PurplePenguin]

But then in effect it's unwinding the contract so the freehold holder should have the option to void the original contract as the contract is not one they would have agreed to.

Such retrospective changes can cause loss of confidence in the system of contracts eg if a contract failed to pay teh agreed return the holder migth end-up bankrupt through no fault of their own. Private individuals could lose their houses when return on fixed investment just doesn't pay so they can't pay ...

What makes me uncomfortable about such changes is that the leaseholders freely entered into those contracts after taking professional/legal advice.

I can only repeat what I said, there is always a change in law risk and freeholders should have been aware of this.

To give you a classic example, the government legislated for disability access rights to buildings. Someone had to pay for the implementation. It could have been the freeholder or the leaseholder, but someone needed to pay, and for both parties it would have been an unexpected cost.

This is why there are change in law provisions in contracts. Some share the pain and some force it on to one of the parties, but if you are transacting with retail customers/consumers, the law is always likely to favour them, so you must accept the risk, and if you can't accept the risk, buy a gilt.

 

[C R]

If there is a case on the basis of advice given then that should be covered by professional standards and existing legislation. Or new laws covering cases where inadequate advice was provided rather than a global cap (which impacts those who eg slod for lower purchase/higher ground rent basis).

When you purchase in France it's carrier out through a Notaire who doesn't act on behalf of either party. They make this very clear and make it very clear that if you want legal or financial advice you should seek your own.

Again a massive purchase not a DFS sofa so buyer would be being careful.

I don't disagree with you, but the purchaser is at a big disadvantage when all the deals available are the same.

 

[Psamathe]

Mesed up posting another aspect - posted to a different/wrong thread <emoji I don't understand ...>

If Gov. can retrospectively change the basis of freely entered into agreements why haven't they retrospectively changed the massive rip-off PFI contracts we are all overpaying for? In effect void them and take ownership of thos eproperties.

If they can do it to private individuals receiving ground rent why not to those holding PFI contracts?