Starmer's vision quest

[Psamathe]

What law could the government change that would allow to cap PFI in the way ground rents are being capped?

I don't know what contract laws govern PFI contracts but eg a new law "Where Private Investor contracts are managing and servicing NHS/Prison/etc. buildings (known as PFI contracts) interest payments will be capped at 1%. And users of those buildings will not be liable for ongoing service payments should they opt for managing maintenance and services themselves ..." - dressed up in legal terms etc.

If they can do it to people holding freehold then why not to people holding FI contracts?

 

[BoldonLad]

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.

It is the escalating fees which are the “issue”, in addition to possible “quality” issues.

Oh, wait a minute, is that similar to Council Tax?

 

[PurplePenguin]

Re: PFI contracts. They contain discriminatory change in law provisions, so targeted legislation would require the investors to be compensated. Of course, the government could just ignore these, but then the UK will end up in lots of legal battles and will become uninvestable.

Nonetheless, the government has nibbled around the edges. For example, the methodology to calculate RPI is being changed to match CPI. None of the holders of RPI linked gilts are too happy about this, but it's not enough to affect the government's creditworthiness, because RPI is flawed.

Also, there has been a load of leasehold reforms over the years and to invest in the sector without considering change in law risk would have been foolish.

There have been countless bits of legislation in every industry that have resulted in winners and losers.

 

[PurplePenguin]

Also on PFI, the government has got a lot better at enforcing maintenance contracts, so they are no longer very profitable for investors.

 

[briantrumpet]

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.

That's what I was getting at in my catch-all comment — politics is one of the things that can intrude on pretty much anything except fixed-rate fixed-term cash investments (I'd have thought), and should be factored in as a risk.

 

[PurplePenguin]

That's what I was getting at in my catch-all comment — politics is one of the things that can intrude on pretty much anything except fixed-rate fixed-term cash investments (I'd have thought), and should be factored in as a risk.

They can change the tax on those, or more severely sanction you or control capital movement.

 

[BoldonLad]

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.

Don't existing laws relating to Leasehold/Freehold gave the Leaseholder to buy the Freehold (in the case of a House?

 

[briantrumpet]

They can change the tax on those, or more severely sanction you or control capital movement.

Ha, guess so, though the implications are probably somewhat less dramatic, given the need to keep stability in financial markets.

 

[Pross]

Don't existing laws relating to Leasehold/Freehold gave the Leaseholder to buy the Freehold (in the case of a House?

But the leaseholder sets the rate. When I bought my current house it was leasehold but I bought the freehold ASAP as a few years later the cost would have jumped significantly. I also would have had to seek the leaseholder’s permission for building work we had planned.

 

[CXRAndy]

View: https://x.com/i/status/2016263358152863857

 

[Psamathe]

I've no idea about what current typical ground rents are (I'v always avoided buying leasehold as never been happy about getting into what I regard as a bad contract like endowment mortgages ...). but a fixed cap will presumably benefit owners of higher value properties more than lower value properties. I would have thought that a cap based on eg purchase price inflation adjusted or some sensible measure based on property value (eg council tax valuation) would be fairer to lower value property owners.

 

[Psamathe]

... But then it all academic anyway. Even if it gets through Parliament Starmer will just U-turn shortly before the implementation date.

 

[PurplePenguin]

I've no idea about what current typical ground rents are (I'v always avoided buying leasehold as never been happy about getting into what I regard as a bad contract like endowment mortgages ...). but a fixed cap will presumably benefit owners of higher value properties more than lower value properties. I would have thought that a cap based on eg purchase price inflation adjusted or some sensible measure based on property value (eg council tax valuation) would be fairer to lower value property owners.

They considered that, but then it would require all properties to be valued, so they went with a fixed cap.

 

[dutchguylivingintheuk]

I've no idea about what current typical ground rents are (I'v always avoided buying leasehold as never been happy about getting into what I regard as a bad contract like endowment mortgages ...). but a fixed cap will presumably benefit owners of higher value properties more than lower value properties. I would have thought that a cap based on eg purchase price inflation adjusted or some sensible measure based on property value (eg council tax valuation) would be fairer to lower value property owners.

It's a start, yes if you have 5000sq ft it's always is going to benefit you more then when you have 50sq ft however they have to start somewhere and i will on the longer term stop prices being overinflated just because they might/possibly/likely be able to be build upon in the future. The next step would be removal of any kind of goverment funding above a certain value in such a way that property developers have to build affordable homes or none at all for it to be profitable for them.

 

[Psamathe]

They considered that, but then it would require all properties to be valued, so they went with a fixed cap.

Put purchase price and purchase year into an Government ptovided calculator system, and inflation adjusts ground-rentable value.

Or we already have valuations used for Council Tax banding.

Or are we just saying that being fair is just too much like work to bother?