Leaseholders Should not worry About new development rights

09 July 2020 | Steve Jones

The Leasehold Group of Companies has said fears that new permitted development rights applying to blocks of flats could lead to a rise in enfranchisement costs might only affect a small proportion of leaseholders.

From 1 August 2020, purpose-built blocks of flats up to 30 metres in height can be extended by two storeys without the need for the freeholder to seek planning consent. The rule change to permitted development rights applies to detached buildings of more than three storeys and constructed within a certain timeframe.

Steve Jones, Director of Valuation at the Leasehold Group, said: “Leaseholders are understandably anxious that these new planning rules might potentially raise the value of their freeholder’s interest in their block, thereby enabling their freeholder to push for a higher overall purchase price following any freehold acquisition claim.

“However, in reality the new permitted development rights may only apply to a small proportion of the total stock of leasehold flats. Many blocks of flats will not fit the criteria or may not be structurally capable of supporting an additional two storeys without the freeholder incurring significant costs to reinforce the building’s structure, which in most cases would not be profitable or worthwhile.

“Furthermore, where such blocks could accommodate additional storeys, some freeholders may have been likely to gain planning permission before 1 August anyway and so their leaseholders should not effectively have to pay more to purchase the freehold as a result of this rule change.

“We anticipate that the new permitted development rights will only apply to a small number of blocks of flats in certain locations, and most leaseholders will not be adversely affected. Time will tell if this does have a dramatic change in freehold purchase prices, and the Leasehold Group will monitor freehold purchase prices to assess the longer-term effects of the new rules.”