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Regeneration, not only in our own region, but across the country, has been a boost to the economy and the property market.

But there remains a barrier to some future regeneration and it is something that potential property buyers should be aware of when they come to invest in a commercial building.

Long leaseholds continue to hold back investment in tired property because owners cannot expect to see similar returns, as against a freehold, if the lease has less than say 80 years to run.

There are examples across Coventry, Warwickshire and the wider West Midlands but this is an issue that is not unique to our region.

Depending on the terms, the ground rent being paid on a property can rise to levels which make it almost worthless, because a potential buyer will not be prepared to fork out to purchase a building and also pay the inflated ground rent price too.

It can be a difficult conversation with the owner of the long leasehold because they believe the property should have risen in value from the time they bought it, when actually, the reverse could be true, as the long leasehold is running down and the ground rent is going up.

Purchasers who have taken proper advice however, can sometimes get a property which may meet their requirements at a much lesser price, which can meet their ability to buy.

Where leases are well in excess of 200 years, as long as the rent is nominal and fixed, it can make the collection of charges relating to maintenance of the common areas of the estate easier to manage.

It is why traditional periods of long leaseholds are no longer an option on newly built homes and there is now a shift towards 250 year terms, and more for commercial property where new long leasehold arrangements are being put in place.   More importantly, they are being taken on at a very low or nominal peppercorn rent for the duration of the lease without any rent reviews.

It means a change in thinking might be needed by the freeholders and particularly local authorities, to get some older commercial stock either sold on or regenerated.

We would definitely advise anyone thinking of purchasing a long leasehold building to seek advice from both a property expert and legal advisors specialising in property to ensure there are no onerous covenants in the lease from either a legal or property point of view.

Pictured:  Peter Holt

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