Mike Taylor

Personal ramblings

[Mike Taylor @MJT3141]

@DrLukeCraddock 1) its not a tax its a loan repayment, just like a credit card, car loan or mortgage loan. 2) Marginal rates are meaningless, even at £100k the effective tax is 31.4%
3) You haven't been saddled with anything, you made a choice, you're now moaning and quoting misleading figures!

[Mike Taylor @MJT3141]

@tbettam1 @revpaulwhite Thats nonsense a graduate earning £50k is paying an effective rate of just 14.97% income tax and less than 4% of income towards the loan. Hope you didnt graduate with a maths degree, as it wouldn't have been money well spent!

[Mike Taylor @MJT3141]

The govt implicitly underwrites the loan book, by borrowing in the gilt market, assume a 20yr tenor at 5.25%. If you're on a low rate like 3.2%, even assuming a 0% default rate, the tax payer loses on every pound they lend out. Given the write off is a lot higher than 0%, and the govts got a negative carry rate, it can hardly be described as a good deal for the tax payer...

[Mike Taylor @MJT3141]

@XanadanX @sophielouisecc Genuine question - what is cost, the government is currently underwriting the loan book, with a loss every year. By normal standards they are pricing the loan book too cheap / allowing deferrals and write-offs, which is not recovered through the interest rate right now!

[Mike Taylor @MJT3141]

@LoftusSteve Surely you would expect a wholesale discount, and further discount for bulk within NHS, rather than supermarket shelf retail pricing?

[Mike Taylor @MJT3141]

@LordNumpty @freeofhold Indeed all very feudal, that nasty legalese probably had a requirement to provide the freeholder with a heriot as well !

[Mike Taylor @MJT3141]

The reality is you need a term structure (curve), not a single rate that will cause winners and losers all over the place. It could be done blending relativity rates to create a new deferment curve that simplifies the total approach, so you don't need complex maths and a surveyor, whilst knocking MV on the head. Otherwise its a coin flip, some folks will be better off, some will be worse off!

[Mike Taylor @MJT3141]

To be honest that's all just maths, the more complicated you make it, the more friction you add, and spend more on surveyors and lawyers 😉 to duke it out. I've argued for a while being able to buy out the GR, if thats blocking a mortgage, should be a simple online transaction, or frictionless buyout at next property sale, and the mortgage company can bake say the £3k cost of the GR annuity into the mortgage, without lots of professional fees... The real issues in so many cases though isn't solved my making something £1k cheaper, its a more fundamental liquidity issue. Leaseholders can't sell because of a short lease or GR, but can't afford to extend and fix the problem. A new buyer doesnt want the hassle of dealing with the extension, without a big haircut. I'd propose the govt needs to fund a financially neutral solution, that allows the leaseholder to borrow enough from a special govt entity, to clean up the title, with a charge on the property, at a rate pegged to a spread over gilts. Spread can cover admin costs, to be tax payer neutral. Once they clean up the title with a 990yr lease and peppercorn GR, they will likely get a higher price and easier sale, and discharge the liquidity loan at the sale...

[Mike Taylor @MJT3141]

@freeofhold @LordNumpty I refer you to my previous comment, this is very nuanced, and taking a sledge hammer to fix everything will obviously trigger legal fights. Everyone is moaning the govt is taking their time, but there isnt a one sized fits all, pretending otherwise is unrealistic.

[Mike Taylor @MJT3141]

@LordNumpty @freeofhold Indeed I was chatting to someone last week that had a client recieving a GR > £10k a yr in West London. If someone has a 60 yr lease on a £2.5m property and swaps an extension fee of £150k for £10k a yr GR, why does govt need to now save them with a £250 GR!

[Mike Taylor @MJT3141]

Without MV, for 95% of cases the maths is incredibly simple and I would even trust the govt to build a website that pulls in a zoopla/rightmove value for a long lease, and discounts it at say 4% (absent MV) and spits out a number for reversion, add on GR pv. Not worth 2 sets of surveyors debating whether your flat is worth £250k or £255k, for a 60 years lease, the difference is £475. Split the difference, the £238 is a lot less than paying 2 surveyors to discuss your kitchen extension.

[Mike Taylor @MJT3141]

@freeofhold @LordNumpty I'm saying this is much more nuanced than the campaigners would like to make out, there are hundreds of thousands of leases where the GR is the sole compensation for managing the building. Sorry if it doesn't fit the narrative...

[Mike Taylor @MJT3141]

The way I read it, it doesnt 'taper off', it capped and then just sunsets 40 years after the legislation is passed to £0, based on estimates that means anyone that 1) has a lease longer than 43 years, 2) has a current a GR > £250, 3) has step ups / RPI's clauses that would take it above £250 will benefit. There is a lot of confusion around the cost. £250 tomorrow and £250 in 40 years time are not worth the same. In 40 yrs inflation will have made that be a lot smaller as a portion of income/property value. The way extensions work you need to pay the PV of future cashflows, so you buy out each future £250 at say a 6% discount rate. So you basically pay £250 for a payment due tomorrow, but only £24 for a payment in 40yrs or £2.36 in 80yrs. Capping at 40 yrs, roughly equates to a 10% discount, because youre only saving the discounted value of sums a couple of generations out.

[Mike Taylor @MJT3141]

Harry loves to peddle this myth that commonhold is suddenly going to reduce costs because residents are in charge. One of 3 things will happen, 1) small uncomplicated blocks will be like current SoF set ups, an old retired couple doing everything for free on behalf of the block - commonhold does nothing for them! 2) larger blocks will still need a profesional MA, if all the residents do exert the sort of control that seems to be described in many threads and audit every £ spent, then the fees to manage the block will double due to the administrative overhead. 3) The residents take on a complicated blocks, and try to manage without a profesional MA, the block will be unmortgageable within a few years as they save money by not doing essential checks, maintenance and repairs. Mortgage companies wont like where the collateral value is going. Harry's fantasy that every profesional MA is taking backhanders and funneling it to freeholders via shadowy offshore SPV's is the bogeyman he's created for his campaign. Yes a very small percentage of blocks have issues and wrestling control matters. The rest someone else is doing the mundane work of organising the gutter cleaning, getting fire and electrical checks done, making sure the roof isnt leaking and chasing 10 flats for the insurance and sc they haven't paid on time!

[Mike Taylor @MJT3141]

Even the idea that its 'money for nothing' and pure profit, is a very tired trope. There are a huge number of flats built out from converted houses, that have modest ground rents, maybe £100 per flat, no service charge clauses, no managing agents. However the freeholder still has the full legal responsibility for insurance, maintenance, s20's. Anyone that thinks that annual work can realistically be done for less than national minimum wage per hr is deluded.

[Mike Taylor @MJT3141]

'Theft' is a ridiculous word Charlie. Purchase of a property is one of the very few transactions in the average person's life, where their interests should be being protected by a member of the legal profession. If you genuinely believe that's whats happening, then you should be making a much louder noise about the rampant professional negligence!

[Mike Taylor @MJT3141]

You're conflating averages and number of people paying it. If 4 people pay £1, not untypical in some Victorian houses and 1 person pays £1000, the average is £201, but 10 people aren't paying it! The national median is more like £120, <20% of leasehold properties are paying more than £250, and will benefit.

[Mike Taylor @MJT3141]

Possible neither one. Will depend on final outcome of legislation, but right now there are 3 known variables for GR, the 40yr cap, the £250 annual payment cap and the 0.1% extension cap. The other variable that hasn't been released is the Cap Rate, which the SoS has to proscribe!
If the value of a long lease on your property is £200k, but you had a £350/ yr ground rent in your lease. Yr to yr you pay the cap of £250. If you want to extend it will be based on the PV of just the 40 yrs left at 0.1% which would be £200! Then you need to discount that at a rate yet to be determined, historically 6% was fairly standard for GR cash flows.

[Mike Taylor @MJT3141]

@LordNumpty @LDHMarketing @PippaCrerar 999 years is entertaining, when so many folks are moaning about Sq0-s and service charges and maintaining 30 year old buildings. Most modern housing stock will have to be rebuilt 10 times or more before that lease expires...