GROUND RENT AND SERVICE CHARGES

Potential escalating costs in a leasehold property

Recent reports in the media have highlighted the problems that can arise when buying, or indeed selling, a leasehold property.

Leasehold properties can be attractive for a variety of reasons, not least because they are often a relatively affordable option in a property market which can be increasingly difficult to break into.
The purchase of a leasehold property is typically accompanied by two additional annual charges, Ground Rent and Service Charge.  Ground Rent is an amount paid to the freeholder or to the superior leaseholder if the property is sub-let.  The Service Charge covers the cost of the maintenance and upkeep of the site the leasehold property is a part of; it may also provide for a reserve fund for unforeseen expenses or for a large maintenance capital outlay.

The Lease will provide details of how the Ground Rent and Service Charge will be calculated and/or apportioned between the different leasehold properties.  It is very important to scrutinise the terms of the Lease.  Provisions such as allowing for a doubling of the payments every few years are a red flag, as are provisions allowing for high percentage increases.   In the case of Arnold v Britton (2015) a clause that provided for annual increases of 10% compound interest to the Service Charge in a 99 year lease was upheld by the Supreme Court.  This was despite the fact that it would result in payments of approximately £1 million per year by the end of the term of the Lease.  The court said that the purpose of interpretation was to identify what the parties had agreed, not what the court thinks they should have agreed. The court’s function was not to relieve parties of the consequences of imprudence or poor advice.

A leasehold property’s freeholder, or their Management Company, is obliged to provide 3 years of accounts and to disclose any disputes with Tenants regarding the service charges as part of a purchase transaction.  This information is very important in ensuring the property being purchased is being correctly and fairly managed.

As a seller, if you have unwittingly purchased a property with escalating  service charges you could find yourself out of pocket not only due to the increases but also because your property becomes so unattractive that you cannot find a buyer.

For further information contact a member of our Commercial team at our Marlborough Office on 01672 518620.

HOME NOT SO SWEET HOME

Buying a house? Think you know what you are paying for it? Of course you do.....or do you?

If you are buying a house that is held under a lease (instead of buying the freehold) you might be thinking that you can buy your freehold easily for a nominal sum.

However there is a growing trend of house builders selling the freehold to investment companies who then ask for big sums in return for selling the freehold.  The developers are allowed to sell the freehold as rights of first refusal apply to flats but not houses.

We  know of one case where a developer was willing to sell the freehold to the homeowner for less than £3,000 but once the freehold was transferred to the investment company they wanted over £30,000. That's ten times as much!

If you are in this situation we can help. Did you know there is a statutory process which will enable you to buy your freehold after 2 years?  This process will also establish the price and the legal fees you need to pay meaning you will not be left having to negotiate with an investment company seeking to extract as high a sum as possible.

If you would like to talk to someone please contact a member of our Commercial Team at any of our offices.

AIRBNB - PROPERTY OWNERS PLEASE PROCEED WITH CAUTION!

Airbnb is an extremely popular online platform linking up property owners with spare rooms with travellers and holiday makers looking for accommodation. Going away for a week? You can earn the money back that you spent on holiday by letting out your flat while you’re away.

However, Airbnb users who own leasehold properties could find themselves in breach of the terms of their lease. If you own a flat in a large building it is likely you own it under leasehold which will almost certainly include a ‘user covenant’ reading something along the lines of “not to use the demised premises for any purpose whatsoever other than as a private residence”. The Upper Tribunal (Lands Chamber) held in a recent case that occupation by travellers/holiday makers and other short term lets through Airbnb cannot be regarded as falling within the definition of ‘private residence’ due to the lack of permanency.  If you’re letting out your flat or a spare room through Airbnb you may just find yourself in a bit of trouble.

And to throw another spanner in the works from 1st January 2017 London homeowners using Airbnb for short term lets are required to apply to the council for planning permission for a ‘material change of use’ if they wish to rent out their property for more than 90 days per year. 

Airbnb is a convenient idea that has clearly proven successful for millions of people,  just ensure you read the terms of your lease and Airbnb terms and conditions carefully before continuing.

Contact any of our offices for further advice.

THE AGEING DEMOGRAPHIC IS TRULY UPON US!

We all know that we are living longer. Recent news that women born in 2030 can expect to live to 90 if you are South Korean and 85 if you are born in the UK is potentially good news.  For men it is slightly shorter namely 84 if South Korean and 82 if born in the UK. 

The lead researcher behind the recent report has said that there may be no barrier to how long people can live. Indeed a book entitled “The 100 year life” written by Lynda Gratton and Andrew Scott says that potentially the age a person born now can expect to live to in the UK is 105.  Further, some commentators say that there is already alive on this planet somebody who will live to 150.

Clearly a longer life span is to be commended but there also needs to be a decent quality of life.  This is why funding in our long term care system needs to be addressed as does the quality of the service provided. In addressing the subject collateral issues include improved diet, appropriate resources and education.

If the news about longevity is correct and there is probably little doubt that it is, the issues concerning the funding crisis in long term care in this country should be of fundamental concern to everybody. This is because it is likely that every man and woman in their lifetime will be involved with the system either for themselves personally or on behalf of someone else. 

Solutions or at least part solutions have been described in previous blogs. Clearly more money is an important part of the solution.  Other things such as quality of care and delivery are also important.  That said these other things should not be used as an excuse to side step the real issue which is the need for substantially increased funding. As said before in earlier blogs a grown up cross party political discussion does need to be started which in turn needs to involve interested stakeholders and the public at large.  

Clearly there is a long way to go and a lot of media coverage before this issue is resolved.  The subject is a changing and moving target which no matter how difficult has to be resolved.

Despite all of the above it is still vital that the existing system is understood. It is the need to understand what the system can and cannot provide, combined with the need to be persistent and to get advice early that is key.


The above is an overview only.

Andrew Douglas
Partner

For a FREE appointment and to find out
answers to the questions that need answering 
also to get the care you or a loved one needs
email Andrew Douglas and his team
or simply call on 0800 072 8636.

Alternatively visit our website abdcare 

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CHIPPENHAM BUSINESS AWARDS 2017

CELEBRATING BUSINESSES IN STYLE! GREAT GATSBY STYLE!

A fabulous evening “roaring 20’s” style was held in the Neeld Hall, Chippenham on Thursday 23 February 2017 courtesy of Chippenham BID (Chippenham Business Improvement District) with Awdry Bailey & Douglas Solicitors being the Main Sponsor.  The event was held in celebration of local businesses in and around the town. Over 150 guests attended. Antiques Journalist, Writer and broadcaster Marc Allum presented the Awards.

The evening started with a drinks reception and welcome speech from Matt Powell, Interim BID Manager followed by an address from ABD Commercial Solicitor Tom Paget, who is also a director of Chippenham BID. This was followed by a delicious 3 course dinner.

The Award presentation then took place and the winners in each category were as follows:
                                                 
Small Business of the Year
Active Potential Therapy Ltd

Start-up Business of the Year
Atlas Gyms 24/7

Young Entrepreneur of the Year
Jordan Gill, Atlas Gyms 24/7

Apprentice of the Year                                  
Alex Cowley, Avagio ITS Ltd

Business Services Provider of the Year                                                           Purpol Marketing and Alison Edgar, The Entrepreneur's Godmother

Chippenham Business of the Year        
Polydeck Resins Ltd

Creative Business of the Year
Digiprint Group

Customer Service Award 
24-7 Staffing

Environmental Business of the Year
Good Energy LTD

Independent Business of the Year
Brinkworth Dairy

Lifetime Achievement Award
Sandy Webb

The main award for Chippenham Business of the Year was presented by ABD Partner and Family Law Solicitor Alexander David. 

AWDRY BAILEY & DOUGLAS PRIZE DRAW

Tom Paget then took to the stage once more for the Awdry Bailey & Douglas Prize Draw with the following fantastic prizes;

1st prize - voucher of £100 towards a meal for two at The George and Dragon, Rowde
2nd prize - round of golf for four at Bowood Golf and Country Club
3rd prize - bottle of Laurent-Perrier Champagne and chocolates

Following the awards guests had the opportunity to take a spin at the casino, with all profits donated towards the fantastic Chippenham based charity Doorway, before carriages at 1.00am.

ABD would like to once again congratulate all of the finalists and in particular the winners of each category. The evening was truly a fabulous one, and thoroughly enjoyed by all who attended. 

ANNOUNCEMENT!

A fantastic £930 in total was raised for the event charity Doorway from donations and the casino!

For more information about Chippenham BID please visit  www.chippenhamconnected.com/

For more information about Doorway please visit  www.doorwayproject.org.uk/

PHOTOS

Want to see more? CLICK HERE  www.pinterest.com and take a look at our Pinterest page Chippenham Business Awards.

KRAFT HEINZ UNILEVER BID

The value of Marmite

On Friday 17th February 2017, anyone following the business news will almost certainly have been excited to hear of Kraft-Heinz staggering $143billion (£115billion) bid for Unilever. When the news was announced, shares in Unilever rocketed by 13%. 

Unilever, a multi national (British Dutch) consumer goods company, own such well known brands as: Marmite, Ben & Jerry’s, Knorr, Radox, Magnum and Hellmans. Kraft-Heinz own such brands as . . . well Kraft and Heinz. A Kraft-Heinz takeover of Unilever would clearly be historic and provide Kraft-Heinz not only with a larger share of their existing markets, but also the opportunity to diversify into some of the other markets in which Unilever has products. 

Unfortunately however, the bid made by Kraft-Heinz (which was 18% higher per share than Unilever’s closing share price the preceding day) was rejected by Unilever on Monday. Unilever has since released a statement to advise that Kraft-Heinz offer had "no merit, either financial or strategic". Many are now wondering what circumstances surround this and quite why the bid was made. Some speculate that Warren Buffet, who is a major shareholder in Kraft-Heinz, is simply a big fan of Marmite, and others that there is more to the offer than is readily apparent. Unfortunately, it seems we are unlikely to find out. 

Oliver Gray
Trainee Solicitor - Commercial

Oliver Gray - Trainee Solicitor
Commercial Department 

Oliver Gray is a Trainee Solicitor
who works in the Commercial
Department dealing with all areas
of commercial work including
contentious and
non contentious work.

He is based at the firms
Marlborough office.

WILL THE GOVERNMENTS PRE CHRISTMAS BOOST TO ADULT SOCIAL CARE FUNDING ACTUALLY HELP?

The pressures which exist in properly funding Adult Social Care given the ever increasing ageing population are hardly ever out of the news headlines. Most recently the Chancellor’s autumn statement and the lack of reference to this issue stimulated debate.  There then followed on the 15th December 2016 the Communities and Local Government Secretaries statement allegedly increasing funding for the sector.

As previously blogged the increased funding has two constituent parts, being:-

• The withholding and withdrawal from 2018 – 19 of the new homes bonus payable to local authorities as a reward for ambitious house building plans. This bonus when payable can presently be used by local authorities for spending how they would like. The intention is to scale back these payments and release the saved funds for adult social care.  The point is that this is not new money, it is instead existing money being switched from one budget, namely housing to another budget.

• The increasing in the social care council tax precept from 2% to 3% for the next two financial years. In addition councils can raise council tax by 1.99% without having to have a local referendum.

Secretary of State Sajid Javid estimated that the measures would make almost £900 million of additional funding available to adult social care over the next two years. The money is of course required now and if evenly applied (assuming the figures are correct) would give local authorities an extra £450 million for each of the next two years.

The facts that seem to presently apply are that 147 of the 151 councils will take up the new social care precept facility. Not all are considering raising the tax by 3%. It is understood that most will also increase council tax by 1.99%.  If this prediction comes to pass it is again estimated that this will raise £543 million. That said it is predicted that it will cost £600 million just to implement the increased minimum wage, with this increase having most impact in the lowly paid care sector.

The predicted facts clearly suggest that the increased funding boost is not entirely new money that the money will not be available immediately and much is already spent on anticipated wage rises in the care sector.

It is fairly safe to predict that the crisis and funding gap in social care will continue and will result in local government cuts in other services.  Solutions or at least part solutions have been described in previous blogs. Clearly the only solution is more money, but how is the question.  A grown up cross party political discussion does need to be started which in turn needs to involve interested stakeholders and the population generally.  We all have a natural interest in this subject given that we are all affected either directly as individuals or collaterally as individuals using the system for the benefit of others. 

Clearly there is a long way to go and a lot of media coverage before this issue is resolved, if ever!!

No matter the shambles it is still vital that the existing system is understood. It is the need to understand what the system can and cannot provide, combined with the need to be persistent and to get advice early that is key.

The above is an overview only.

Andrew Douglas
Partner

For a FREE appointment and to find out
answers to the questions that need answering 
also to get the care you or a loved one needs
email Andrew Douglas and his  team
or simply call on 0800 072 8636.

Alternatively visit our website abdcare 

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