CB now paid on 43! Props to COL for a great offering on this one.
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If all (or at least a substantial majority) of the leases in this block have been registered by the end of the 8 week consultation there may be no direct impact. However there is a risk the buyer of the freehold will pull out, or at least attempt to renegotiate the multiplier factor.
It appears from the outline agreement the purchase price has been calculated as flats (252) x annual ground rent (£300) x multiplier (24). EDIT: Ground rent subject to 5 yearly RPI escalation, no reduction in deflationary times. 250 year lease (Source: page 31 of lease attached to Unit 2.15 loan)
Any leases unregistered at the end of the 8 week consultation period will probably have to be registered at a peppercorn rent (perhaps £1 pa with no escalation).
Until its clearer what sanctions the government can (and is willing to) apply to currently registered leaseholds, the firesale value of assets such as this will likely be significantly lower than currently valued.
Given my slightly risk averse nature, despite the 14% yield, I have bailed.
All seem to refer to houses - no specific mention of flats/apartments scenario. Has anyone seen any clarification on this?
From The Guardian (link above): "Flats can be continued to be sold as leasehold, but ground rents will be restricted to a “peppercorn” level and therefore be of little financial value to speculative buyers. The ban is expected to come into force after an eight-week consultation period. "
Leasehold houses will be banned completely, so the reporting of restricted ground rents is (lazy journalism) taken to imply shared blocks of flats etc which for now leashold is the easiest model to handle the common parts and actual land. I suspect in time it will be mandatory for flats etc to be sold with a share of the freehold.
I share mrclondon's concern but I never really believed the value being touted so was only ever prepared to lend against the first tranche when the LTV was down at a theoretical 37.33%. I think I'll probably stick with that holding but if I'd been tempted by the later cashback bolstered tranche at the higher LTV, I would be rather less sanguine.
Better to remain silent and thought a fool than to speak out and remove all doubt.
Any thoughts on how this ruling affects the position of this loan Gordon?
Its not a ruling its a consultation paper. Nothing will change legally until it gets enacted which is probably at least a year away (some other minor piece of legislation in the way I suspect) If the result of the consultation is that it will reduce house building then the proposals will be quitely modified. Exisitng leases wont be affected and the ban is for houses not flats. Flats may be effected by changes to ground rents with the govt minded towards peppercorn but it may be the result is limits on initial rents/annual increases.
Minor shareholder in Assetz Capital, Brickowner and now Welendus
PLEASE NOTE : All opinions and observations made on this forum are my own view and made in a personal capcity. I have no links to any platform and I am not a financial professional so nothing posted should be consider financial advice or promotion. I accept no responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained in my posts.