Leasehold or Outright Ownership – the facts.

Leasehold ban proposal – the facts

Jim Gibson, Managing Director at HomeReportScotland.Scot
As you may have seen in the news, in July the UK government announced radical new proposals to cut out unfair abuses of leaseholds in a major move to deliver a fairer, more transparent system for homebuyers in England and Wales.

Communities Secretary Sajid Javid proposed that leaseholds on new-build houses would be outlawed, while ground rents could be dramatically reduced, as he seeks to end “long-term” financial abuse by developers.
But what does this really mean for buyers and sellers, and importantly, will the ban have an impact in Scotland?
What is a leasehold?

Traditionally property in England & Wales has been held under two types of tenure – ‘Freehold’ where the owner owns the ground and property in perpetuity and Leasehold where the owner has possession of the property but the land is held by a ‘Freeholder’ who charges rent on the lease.

Property which is owned and is subject to a leasehold is normally held under leases lasting anywhere between 99 – 999 years, the lower figure being more common. Technically when the lease expires, ownership of the land and property reverts to the ‘Freeholder’. However legislation allows leasehold interests to be extended up to once for the same period, or in some cases purchased by the leaseholder.
The home owner pays an annual ‘ground rent’ to the freeholder, and has to ask permission from the freeholder to make alterations or adjustments to the property, such as building a conservatory or changing the windows – often subject to a cost.

What’s the problem with leaseholds?

In the past, leasehold property owners were generally charged tiny ground rents, sometimes as little as £1 per year, and many freeholders didn’t bother to collect it. However, over the last century, property developers & investors purchasing large numbers of leaseholds began inserting clauses into leasehold contracts where the ground rents were set at anywhere between £200-£400 a year, doubling every ten years, meaning that the ground rents for leaseholders were soon spiralling to absurd levels.
The Leasehold Knowledge Partnership, which vigorously campaigns on the issue, estimates that around 100,000 homebuyers are trapped in contracts with spiralling ground rents.
With ground rents doubling every decade, this can often make leasehold properties impossible to sell. Many leaseholders find that lenders won’t grant mortgages against homes with ground rent clauses or with terms of less than 70 years remaining, and conveyancing solicitors warn prospective buyers from purchasing. Leaseholds homes that are saleable are sometimes offered at a huge discount, crippling the home owner. The cost of purchasing the lease has also hugely increased over the last decade from a few thousand pounds to five figures making it prohibitive in some cases.

What happens now?

The UK government has proposed a ban on the future sale of houses on a leasehold basis, as well as cutting ground rents to zero. The government will also seek to close legal loopholes to protect consumers and prevent unfair agreements and spiralling ground rents, and the proposals include plans to change the rules of Help to Buy loans so that the scheme can be used to acquire new-build houses only where the terms are acceptable.
Do the leasehold proposals impact me in Scotland?
In Scotland, we historically had our own form of property tenure called ‘feuhold’. This was previously the most common form of land tenure in Scotland, as conveyancing in Scots law was dominated by feudalism.
However, legislation passed by the Scottish parliament, including the Abolition of Feudal Tenure (Scotland) Act 2000, and the Tenements (Scotland) Act 2004, effectively brought feuhold to an end.
Now nearly all property is held under a tenure known as ‘Outright or Absolute Ownership’, including apartments and tenements. This is comparable to ‘Freehold’.
Furthermore, the Long Leases (Scotland) Act 2012 automatically converted remaining long leases over 175 years to outright ownership. However, there are still a handful of isolated cases where leasehold properties remain in Scotland. For example, check out this property on Byres Road in Glasgow:

Grosvenor House, Hillhead, Glasgow, G12

There is no leasehold law in Australasia, North America or continental Europe, and England and Wales remain the only jurisdiction in the world to retain leasehold property laws.
The government proposals are subject to an eight-week consultation. If successful, the government will consider how far to cap existing ground rents and try to ban leaseholds altogether.
As Communities Secretary Sajid Javid said: “Enough is enough. These practices are unjust, unnecessary and need to stop.”

Cryptocurrencies…. The future??

Scotland’s first digital currency house sale

Jim Gibson, Managing Director at HomeReportScotland.Scot

Did you see the first ever UK property to be sold using digital currency, rather than Sterling, was here in Scotland? A flat in Glasgow’s south side has become the first property in the country to be purchased using Scotcoin – a type of cryptocurrency established in Scotland in 2013.

What is Bitcoin?

In simple terms, Bitcoin is an encrypted digital currency, created and held electronically, that uses decentralised technology for secure payments and storing money anonymously that doesn’t require conventional banks. There are as many as 5.8 million users throughout the world that have cryptocurrency wallets, and there is a finite limit of 21 billion Bitcoins currently in circulation.

What is Scotcoin?

Although Bitcoin is the main cryptocurrency there are hundreds of different, smaller ones, all benchmarked of the main player. Scotcoin has become one of the most successful country-related digital currencies. Whilst it has Scottish roots, the currency is not limited to just Scotland and can be used worldwide. Using the Bitcoin blockchain payment method, users can safely and effortlessly send and receive currency into their Scotcoin wallets. The total size of the Scotcoin economy can only ever be 1 billion Scotcoin which means as the currency becomes scarce, its value will only increase.

The transaction

The two-bedroom apartment was sold for 10 million Scotcoin which is the equivalent of £60,000. Despite it being a digital house sale, the transaction was still subject to normal conveyancing rules and procedures, including the commissioning of a Home Report, which revealed the fair value of the flat in Sterling and was then converted into the cryptocurrency.

What is the future for property sales via cryptocurrency?

If this property sale is anything to go by, the future looks bright for cryptocurrencies, particularly in the housing market. Given the transaction was treated as any standard sale, this suggests digital currencies may well become a routine way to purchase a home in the not so distant future.

The currency was originally created as an answer to uncertainty within the current financial situation and to safeguard the Scottish economy should there be major disruption. The excitement surrounding this house sale seems it may well be more than just a fleeting craze and paves the way for the future of property buying and selling.

What Should I Expect from my Home Report??

What should I expect in my Home Report?

Top Tips for Scottish sellers – Jim Gibson, Managing Director at HomeReportScotland.Scot

If you make the decision to put your home on the market, you’ll probably have some questions about the process and what steps you’ll need to take next. Did you know that it is up to you to organise a Home Report and that you need to provide copies, upon request, to prospective buyers?

When a Home Report is carried out properly, it gives both the seller and the buyer a realistic idea of the value and condition of the property, and also provides the buyer with all the information they need to make an informed choice about buying.

What is a Home Report?

As set out in the Housing (Scotland) Act 2006, the Home Report is a pack of three key documents: a Single Survey, an Energy Report and a Property Questionnaire.

Single Survey

A Single Survey lists key features of the home – including the roof, internal and external walls, plumbing and kitchen fittings – and gives an assessment of condition for each one. This is done on a scale, with one indicating no repairs necessary, to three, which means urgent repairs or replacements are needed. The key things which will be assessed include problems with utilities, damp, cracking, issues with the roof, and timber defects.
This makes it easier for the prospective buyer to see if the house is in good condition, or if there are things that may need fixing now or in the future, and if they need to factor these repairs into their overall budget.
The Single Survey will also provide a valuation of the property, and an accessibility audit, which is helpful for parents with young children, older people, and those with disabilities and/or limited mobility.

Energy Report

The Energy Report contains an assessment of the energy efficiency of the home and its environmental impact, as well as providing tips on how this could be improved. Items such as loft insulation, domestic boilers, hot water tanks, radiators and windows will all be checked.

Property Questionnaire

The Property Questionnaire is filled out by you, and gives some extra information about the house, such as the Council Tax banding, parking facilities, alterations made to the property, any local authority notices that affect it, and factoring costs, such as upkeep of communal areas.

Is there a deadline/set process for providing interested buyers with my Home Report?

If a buyer asks for a copy of a Home Report, this should be sent to them within nine days, usually in an electronic format. If you have a solicitor or estate agent, they will send out the Home Report for you.
You need to give the Home Report to anyone who is interested in buying your home, unless you are certain they are not serious about purchasing the property. The duty to provide a Home Report does not apply if you reasonably believe that the person making the request for a copy:
• is unlikely to have sufficient means to buy your property in question
• is not genuinely interested in buying your property
• is not a person to whom you would be prepared to sell your property
Bear in mind that you cannot discriminate against certain groups of people when deciding whether to send them your Home Report. There is no need to assess every prospective purchaser against these criteria; just that in these cases you don’t have to provide a Home Report if you don’t want to. However, if someone believes that you have withheld a Home Report from them without good reason, they can complain to their local Trading Standards. If Trading Standards decide you have acted unfairly, you could be fined.

How often do I need to update my Home Report?

The documents in the Home Report should be no more than 12 weeks old when your property goes on the market.
However, once your property is on the market, the legislation does not give a set expiry date or validity period for any of the Home Report documents. It’s up to the sellers, buyers and their professional advisors to decide whether aspects of the Home Report should be replaced, depending on the circumstances of each case.

It is good practice to keep your Home Report up-to-date. Check with your professional advisor if they think you should refresh your Home Report – especially if your home has been on the market for a long time. A Home Report refresh is really easy, and can be done through an inexpensive, straight-forward re-inspection.

What if I don’t have a Home Report?

It is against the law to sell your home without a Home Report, or to include any false information in the documents. If you do, you could receive a fine of up to £500.

We believe buying a Home Report should be simple and affordable. Visit HomeReportScotland for a free, instant home report quote for your property, and let us help you get from where you are today to where you want to be.

Myth-busting 101 – The dreaded Category ‘3’

Myth Busting 101: Category 3 Ratings

Jim Gibson, Managing Director at HomeReportScotland.Scot

So, you’re selling your home and you’ve tackled the first hurdle of sorting out your Home Report. Now you wait in anticipation for the results of the Single Survey. At the back of your mind is the dreaded Category 3 rating – any home sellers’ worst nightmare.

The Single Survey provides a detailed report on the condition and value of the property, and is intended to provide both the seller and purchaser information about the property condition and value before offers are submitted. The key things which will be assessed include problems with utilities, damp, cracking, issues with the roof, and timber defects. The condition of the property is split into three categories.

A Category 3 rating means that urgent repairs or replacements are needed immediately. Failure to deal with them may cause problems to other parts of the property or cause a safety hazard. Pretty scary, right?

When we carried out some recent research, we found that nearly 15% of sellers in Scotland are worried about getting a Category 3 rating in their Home Report, and that got us thinking. Yes, a Category 3 stamp can be a bit daunting, but it doesn’t have to be as terrifying as you first thought. We’ve pulled together this short guide to help explain what to do and think if your property does receive a Category 3 in the Home Report:

Don’t panic. Category 3’s are a fact of life – properties cannot remain perfect forever. Although property maintenance is essential, wear and tear is inevitable. Think that beautiful thatched cottage in the Isle of Skye never received a category 3? Think again.

Acknowledge the information. You might not have realised that your current roof covering is deteriorating or that the guttering is blocked. The Home Report is a useful and transparent document and helps to highlight issues that may save you hassle further down the line.

Decide if you are going to fix the damage. If you do go down this route, make sure to do your research, get multiple quotes and hire a trusted tradesman to do any work.

Or, alternatively, you could proceed without alterations to the property. However, be aware that there may be the potential that you receive lower offers as the Home Report takes repair charges into consideration.

On the other hand, a surveyor may still value your property at the same price, despite one or two Category 3’s. A Home Report provides the seller and buyer with a realistic idea of the value and condition of the property. Surveyors often encourage buyers to take out further reports so one Category 3 in the Single Survey isn’t usually enough to deter a potential buyer.

Remember, no one expects your property to be faultless. Home Reports are compulsory in Scotland so uncovering Category 3’s is inevitable. All in all, it is better to identify any urgent repairs than turn a blind eye – at least this way potential buyers know exactly what they are dealing with and have no nasty surprises once they have moved in.

We hope we have busted some of the myths associated with Category 3 ratings, but if you have any questions or worries then don’t hesitate to contact us at HomeReportScotland.Scot where we can hopefully turn you worst nightmare into a dream sale!

Property & The Power of Social Media

Picture Perfect: Property and the Power of Social Media

Jim Gibson, Managing Director at HomeReportScotland.Scot

Social media has infiltrated just about every aspect of our lives. It is now almost impossible to brunch with a friend without having to wait a few moments once your meal has arrived to allow them to snap the perfect Instagram post. Only once they have finished hashtagging #eggsbenny can you proceed to tuck in. So, why should property be any different?

Believe it or not, people are starting to use social media to buy and sell property, and it looks like this is just the beginning. We’re not just talking about the plethora of Pinterest pages full of shabby chic, upcycled, chest of drawers, with dedication to DIY and all things home improvement. Today we’re seeing Instagram posts advertising impeccable new listings, celebrity endorsed property sales and the viral power of a Facebook share or Twitter retweet.

With research showing that 93% of property searches begin online, it makes sense that buyers and sellers alike are using the global power of social media platforms. Never has the mantra of ‘picture perfect’ rang so true now that Instagram filters and editing apps have become a normal part of photograph sharing. A quick search on the photo-posting site Instagram reveals that the word ‘property’ has been hashtagged over 1.8 million times and the figure continues to rise on an hourly basis.

Picture Perfect

Twenty years ago, property searching was about kerb appeal: if you stood on the street, it was the garden, the porch and the visible furnishings that lured you into the house. Now however, flawless lighting at the ‘golden hour’ of the day and meticulous attention to detail are essential to capturing knockout property shots. Enticing could-be-buyers through social media platforms means that quality photography has never been so important. If you want to sell your property, you have to show it at its best – garden shots when the sun is shining and foamy bubbles and candles in the candid bathroom snap. Property images must now capture the lifestyle that goes with the shot too – allowing the viewer to fully imagine what their life might be like if they lived there.

With Pinterest and Instagram heralded as ‘the big 2’, let us not forget about Facebook and Twitter. For many home-sellers, capturing an award-winning photograph is not always realistic, but sharing a post that contains wow factor photographs of their property is. The power of viral is a force to be reckoned with – retweeting and sharing your property ad once it has been posted by your estate agent is the fastest way to capture your circle’s interest. Your contacts can then share it with their circle and their circle’s circle and so on. If online shopping has become more popular than traditional high street shopping, it is only a matter of time before property viewing takes place solely in the comfort of one’s own home.

Social commerce isn’t the only thing on the rise either. Mobile browsing now sees 78% of buyers using this method to look for comparable home prices, with a further 45% searching for their next home. To not tap into this unprecedented world of property hunting would seem a waste.

The future?

Whilst we might still be a little way off exchanging housing contracts via an Instagram post, it is a no brainer that exploiting the world of social media to browse for your dream property, or to entice potential buyers is the way forward, and this is hugely exciting. Now, excuse me whilst I work out how best to capture the contrast between this solid oak flooring and my minimalist inspired kitchen.

Some of our favourite property accounts include:

Instagram: @daniel_daggers

Self-proclaimed ‘Mr Super Prime’, Daniel uses Instagram to promote property ‘to the super rich across the world’. He has previously been featured in Tatler and British GQ.

Facebook: Rightmove

RightMove know exactly how to make best use of the world’s most popular social media platform. Daily posts allow followers to search for their dream home.

Twitter: @UrbanSpacesCity

Understanding the art of living, Urban Spaces provides interesting and insightful posts on all things property related as well as showcasing the best properties in London.