Vie MBK from The Telegraph:
The vast majority of houses were sold under freehold, traditionally, while flats were leasehold. The latter puts owners at a disadvantage, exposing them to the whims of the freeholder.
But now houses, as well as flats, are also being sold with leases. Homebuilding giants such as Taylor Wimpey, Bellway and Persimmon then sell on the freehold as an extra source of income.
Telegraph Money has previously highlighted the plight of Taylor Wimpey homeowners whose leases include provisions that can mean ground rents double every decade. As well as the growing cost of paying ground rent, such terms cut the value of the property.
Admittedly, you have to worry about the naivety of some people, but LVT-man will sort it out.
I've explained this before when people advance the KLN: "But what about leasehold flats? How do you apportion the LVT bill between leaseholder and freeholder? What if there is a head lease and then sub-leases and sub-sub-leases? It's all very complicated!"
No it's not.
We know what the location element of the rental value of any flat is, regardless of chain of title. Let's say median £5,000 a year or something. If the leaseholder with immediate right to occupation has to pay £500 a year in 'ground rent' (i.e. privately collected LVT), his LVT bill is reduced to £4,500 and the freeholder gets an LVT bill of £500 (if LVT rate is less than 100%, the bills are scaled down proportionately).
If there's an intermediate leaseholder, receiving £500 per flat in a block and paying £200 per flat to the superior interest, his LVT bill is £300 (or whatever percentage) per flat, and so on.
This would pretty much demolish the value of the freehold reversion and any intermediate leases, making it easier for tenants to enfranchise, transferring the liability from the freeholder to the newly enfranchised tenants.
If the builder has played clever buggers and wants more ground rent than the LVT value, he just pays tax on what he actually asks for and the tenant has a zero LVT bill.
If a freeholder wants to sell the freehold reversion as an "investment" or lets tenants enfranchise, LVT would be levied on the entire proceeds (paying several years' tax on several years' income received up front). The investor or tenant can then amortise the appropriate part of the cost* against their own future LVT bills. So the greedier the freeholder is, the lower the future LVT bills for subsequent 'investor' or newly enfranchised tenant.
In these cases, an LVT rate of 100% would be ideal because it would make the whole exercise pointless from the point of view of the cynical land speculators and piss taking freeholders.
Sorted.
* The next 'investor' or tenant is paying for two things - a) the NPV of the ground rent income until the lease expires, which would be an allowable deduction for LVT purposes, and b) the value of the freehold reversion, which would largely relate to bricks and mortar and hence be irrelevant for LVT purposes. We can work out the value of a) very easily and arrive at b) by subtraction.
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