Housed: The Shared Living Podcast
Sarah Canning and Deenie Lee of The Property Marketing Strategists have teamed up with Daniel Smith of Student Housing Consultancy to discuss the latest news, views and insights in the shared living sector.
Each episode they will be delving into a wide variety of subjects and asking the questions which aren't often asked.
This podcast is a must for anyone working in Student Accommodation, BTR, Co-Living, Operational Real Estate or Shared Living.
Housed: The Shared Living Podcast
The Student Loan Scandal, Why Accreditation Matters, Rental Security PLUS Ask the Expert Feature on The Leasehold and Freehold Act
Episode 11 in Season 3, Sarah, Dan and Deenie discuss:
🎙 Fraud in Higher Education - the student loan scandal exposed by The Sunday Times
🎙 The USP nobody in shared living is talking about
🎙 Do students care if accommodation is accredited?
🎙 Do universities need to take a more proactive approach to supporting students looking for off-campus accommodation?
PLUS Amanda McNeil of Howard Kennedy joins us for our Ask the Expert feature answering your questions on The Leasehold and Freehold Act.
Download our Youth Forum on students and accreditation here.
Our sponsor for this season, theeword are true experts in digital marketing specifically for the property sector.
We are also delighted that MyStudentHalls are continuing to sponsor the podcast, Mystudenthalls.com - Find your ideal student accommodation across the UK.
Each week, Sarah Canning, Deenie Lee of The Property Marketing Strategists and Daniel Smith of RESI Consultancy will be delving into a wide variety of subjects and asking the questions that aren't often asked. This podcast is for anyone who works in Student Accommodation, BTR, Co-living, Later Living, university accommodation, Operational Real Estate or Shared Living.
Disclaimer: The views and opinions expressed in this podcast are the personal views of the individual hosts and guests.
Hello and welcome to the 11th episode in Season 3 of Housed, the Shared Living Podcast. I'm Deanie Leake from the Property Marketing Strategists.
Speaker 2:I'm Dan Smith from Resi Consultancy.
Speaker 3:And I'm Sarah Canning from the Property Marketing.
Speaker 1:Strategists. And first just a quick word from our sponsor, this episode of Housed, the.
Speaker 4:Shared Living Podcast is brought to you by the E-Word digital experts in driving leads and putting people in your places.
Speaker 1:We're delighted to have the eWorda sponsors of this season. The service and insight they provide to the sector on their digital marketing advertising is, of course, second to none, so if you haven't reached out to them, please make sure you do. And also a big, huge thank you to Dan and the team at my Student Halls who are also sponsoring this season. More from them later. Later in this episode we'll be hearing from Amanda, from Howard Kennedy, answering your questions about the Leasehold and Freehold Act, so stay tuned for that. You absolutely delivered on sending your questions in and we were delighted to get so many of them answered by Amanda, so thank you for that. So first, guys, what's what's going on? What is their news? What's what's happening in the sector?
Speaker 2:I spent quite a lot of Sunday fielding calls for and some messages as well from people saying have you seen this? And it's the Sunday Times, which you can see there. The front page says reveals the giant fraud in student loans, sham students enrolled simply to access funds. Philipson fears scale of financial scandal and what this comes down to is effectively some UK franchise entities which are linked to certain lead universities. They're basically smaller colleges that bigger universities get to do some courses for them. It's quite a simple model. It's not one that I particularly like. If you can't teach them, then you shouldn't let them apply, you shouldn't take their applications. But some of these smaller colleges are bypassing some of the checks and the ongoing monitoring of students and that has created something of a loophole for fraud. So what's happening at the moment and what's been exposed is that there is a significant number of Romanian nationals. Now they have settled status in the UK, because that's how this has been exposed and that's why this is quite such a problem. But they are applying to student loans company for their student loans, their maintenance loans, and they're never going to have to pay them back.
Speaker 2:Some of it's fraudulently done with duplicate addresses and duplicate names and things like that, but there is a real problem with Romanian students in particular as to are they actually turning up for some of these courses? Are those courses being monitored well enough? Now there are some universities where 63% of their international cohort is Romanian, and the next one down the list was 55%, and then it sort of starts dropping off. But the average Romanian cohort in UK universities is about 1% of international students are from Romania. So anything over and above that feels a little bit curious. Let's just say that Now I put on LinkedIn these stats, using the HESA data, and actually Mark Korver messaged me and just said yes, you know, we do have a significant problem with Romanian students, but these are Romanian students with settled status, so that data is actually applying to international students. The problem that we have is with Romanian students who are Romanians by nationality but they have settled status in the UK and therefore they can apply for student loans, and that sounds like quite a significant number. Clearly it is because there are universities here on the hook for tens of millions of pounds and that money is going to those students who are either sending it back to Romania or using it themselves, and I would say they are not necessarily turning up to the lectures that they probably should.
Speaker 2:So it's turned into an absolute palaver. Bridget Philipson, the education secretary, is firmly involved. Now it's shown that the Office for Students has absolutely no teeth. It's equivalent to a gummy grandma telling naughty grandchildren to take their hands out the cookie jar, like that's as much as a ticking off as these universities seems to get from the Office for Students. Universities UK haven't seen anything come from them as yet, but clearly the sector has known about this problem for quite some time, because two weeks ago when I turned up to the PIE conference about this problem for quite some time. Because two weeks ago when I turned up to the PIE conference, which is, you know, brilliant higher education conference with specializing sort of global mobility, the first person I spoke to who was like hey, dan, good to see you here, you know, really good to see PBSA and accommodation represented, said have you heard about the number of Romanian truckers studying in UK universities? And that instantly set the tone for the rest of my time at the Pi and numerous other people were mentioning this. They knew it was a problem, they knew it was Romania and yet nothing had been done about it so far by the Office for Students or anyone else.
Speaker 2:It took two investigative journalists from the Sunday Times to bring this to everyone's attention and, yes, to sort of railroad the hit the end of my weekend.
Speaker 2:But I just think this just goes to show we have some serious problems in our higher education institutions If, firstly, they're using and relying on these franchise partners, as it were, the sort of smaller colleges spurious colleges, I think it's. It was smaller institutions like oxford business college, like you know, no one knows exactly what that college is or does or you know, but but ultimately they are a franchise partner for a lead university and they have been called out very heavily in this article. It's well worth a read if you get the link online at the Sunday Times. But, yeah, everyone's been found wanting here. Universities have been far too aggressive in terms of the way that they're running at the moment with these franchise partners and they've taken their eye completely off the ball because they're super happy to take the money. So, yeah, I know that it's not something that you you both necessarily really saw, but, yeah, what are your? What are your thoughts on, on whether the OFS actually has any teeth and what we can be doing to sort of improve things?
Speaker 3:my first question, dan, is why did you take your post off LinkedIn? What was there a backlash to you posting it?
Speaker 2:Oh no, no, not at all. It would have gone pretty crazy. Actually, the week before, I had a post go viral and this one would have done the same, I could tell. But it was because I want to make sure that all the data that I post at any given time is correct. So, you know, I typically rely on the likes of Mark Korver and Dave Amore to provide the data and then I can add some colour to it. So when Mark sort of messaged and said, yes, we've got a big problem with Romanian students, but actually the students in your data are actually international students and therefore don't benefit from the student loan, that's when I thought, yeah, that will end up looking misleading. It could catch a few universities in there that don't necessarily have a major problem with this. So that's why. That's why I pulled it.
Speaker 1:And I guess where I'm and I haven't read the article and I haven't delved into this yet at all, but is the, I guess. Where is the fault? Is there a fault with the system that people have been able to do this? Is it just really good, well hidden fraud? Or is it just people turning a blind eye because it benefits them? Or do we not know the answer to that yet?
Speaker 2:it's? It's well hidden fraud, but it is effectively caused by by chronic underfunding. So we've got so much financial instability at our UK universities, they're going to look for alternative revenue streams if they can, when a smaller potential franchise partner comes to them and says hey, I could definitely run some of these courses for you and you'll get a cut of all the fees, et cetera, because the universities don't take all the fees. Some of these smaller entities take half the fees. Quarter goes to the agent, quarter goes back to the university. Maybe then they're going to bite your hand off, especially if they are dealing with gigantic black holes in their accounts. So chronic underfunding is an issue.
Speaker 2:Weak leadership I've always bemoaned the lack of commercial leadership and the sort of life academics that are running our universities. These are billion pound businesses, so you need some serious understanding of the fundamentals of the economic models of big business, I think, to really drive that forward. Now, that's not to say that you shouldn't have any life academics running universities. There are some brilliant VCs out there, but there's just a major problem with a lack of commerciality. That is probably leading some along the path of right. Okay, not sure where the money's coming from, so let's just focus on getting students in, don't necessarily worry about whether they are actually turning up to their courses. The unregulated growth that has come from that, the unregulated growth that has come from that just it, just it it's born out of. Some vcs are thinking I need a legacy. It can't just be that we stayed as we were or that we actually reduced and streamlined and we focused on what we're good at it's growth at all costs. That's the mentality that I've seen in a lot of different universities, especially tier two universities. You look at the numbers they're absolutely gigantic. When you compare, compare tier two to a Russell University in each city normally double. And I think that's probably because, yes, there's lots of part time courses, vocational courses, whatever else it might be. But I think that lack of quality is really creeping in, which is why there's such a flight to quality, with international students in particular. Then you could look at ineffective regulation.
Speaker 2:The OFS, as I said, is very much toothless. If you look at the news articles on the OFS website, it's literally so-and-so university changed their name. There's a couple of like here's a warning for this university that has questionable attendance on some of their courses and things like that. But there's no real action there. There's no bite to anything that they're doing they aren't empowered to like. It's not necessarily weak leadership at the top of the ofs. They do have a new uh chairman who's just come in to to effectively sort things out, but it is weak. It's it's a weak entity and I don't think it's been given enough power by previous governments and this government needs to sort that out very quickly and then, yeah, it's the government in action. You know there's been plenty of warnings.
Speaker 2:The fact that you know, the moment I get to the pie, a big higher education event and people talk to me about romanian truckers as the first talking point that really it just shows that it's hiding in plain sight. So this is something that everyone's known about for a long time. A lot of these universities should be left to go to the wall rather than having to give the rest of the sector a bad name by going after effectively fraudulent students or turning a blind eye. At the very least, it is complete and utter incompetence and anybody at those universities which should be named I I am disappointed that the times article didn't go further and only named, you know, oxford business college as a. As a small franchise partner. I want to see which of those universities that are actually taking far too many Romanian students that are based in the UK and you know what are the graduate outcomes for those students, how many actually complete their courses?
Speaker 2:This is where I'm just so frustrated with all of the data that we have in the sector across. I think PBSA and BTR and the living sectors have really got their act together. Data's getting there, but higher education is in the dark ages. You know I'm looking at the results from 22-23 on HESA. That's absolutely ridiculous. There is no reason why it can't be real time, there's no reason why you can't, or monthly at the very least, and I think that UCAS are starting to do a good job.
Speaker 2:Enrollee really helped with some of that data. God, they're right ahead of everyone else. But the universities and the bodies that oversee universities so the OFS and HESA they have been found wanting. And so Bridget Phillipson really needs to get her house in order in higher education because there are so many things to run at here. She needs some significant help in higher education. I would be forming a task force personally if I was her, to address, obviously, student housing crisis in terms of the affordability of student housing in the uk also the the fraudulent cases, this, the viability of universities and the funding model. So you've got four key things to run out there, but this is mismanagement of universities at the highest possible level and it's gross negligence in my opinion.
Speaker 3:I think if I'd seen this in the Daily Mail, I would have dismissed it as xenophobia. If I'm honest, you know it's smacked of you know the Brexiteers and you know conservatives and all of that, but actually I did read it and it had way more depth and substance to that and it is. You know, I just keep thinking, like you know, we know that the government doesn't have, you know, an endless supply of money to dish out and you know the thought of a lot of that money being mismanaged at a time when the government is looking to review the PIP payments for disabled people is really, you know, it's not a great week for this to be emerging, I would say, because you know there's clearly a black hole that they need to fix. Maybe they wouldn't have to take things away from other people, you know, if this had been managed better. So thanks for bringing it to our attention, dan. We'll definitely keep a close eye on that.
Speaker 1:You'll be listening to this show on Friday and this story broke on Sunday and we're recording this on Monday. So by the time you listen to it, I'm sure there might be more developments coming through. So we have kept up to date as we can, but we'll watch as the story progresses. We're going to take a quick break now, but we're going to come back and talk a little bit about the Property Marketing Strategist's recent Youth Forum accreditation, which is quite interesting. But first we'll take a break and hear from our sponsor, season three of Housed, sponsored by mystudenthallscom. Let's find your place. Thanks again so much to my Student Halls for supporting us for a second season. We are so happy that the lovely listeners of Howes are getting their properties listed where it matters. Now back to our chat. So, sarah, we, I think a couple of weeks ago, released a new youth forum on accreditation Quite interesting. What did we find?
Speaker 3:Well, it was interesting because while we were talking about asking students about accreditation and sharing our findings, we were talking to operators and the general consensus was students don't care about accreditation, like why, why bother asking them? And that wasn't the case at all. They do care about it but they don't know about it because nobody's telling them about it. So we and we saw this in our, in our mystery shopping programme as well that people aren't telling them, saw this in our, in our mystery shopping program as well that people aren't telling them and we just felt like the time was right to talk about this because, with the renter's rights bill coming into play, obviously if you want to be exempt under pbsa as we heard last week from from holly, from howard kennedy you have to be accredited. So therefore, being accredited is going to be a differentiator. So it's really important to talk about it. So yeah, so we asked students lots of questions about whether they looked for properties that were accredited, what they care about, what they think should be part of accreditation and kind of, what sort of quality marks do they recognise. So one of the key findings was 61% of students didn't check whether their accommodation was accredited before they booked. But in hindsight, over half said it was important in their decision making. I found it really interesting.
Speaker 3:So yesterday I saw that Verve Life have launched a new website, so I had a look on it and I was so pleased that accreditation is like front and centre of their website. So and we don't see it in PBSA it's usually buried in the FAQs. It's almost like it has to be there for SEO purposes. You know the word ANAC, you know let's put that somewhere just so that we can tick the box. But actually on BirdLife's website they've got a section on the homepage that says a trusted approach to deposits and protection and it says your trust matters to us. We're committed to giving you peace of mind, which is why we're members of the tenancy deposit scheme and my Deposit Scotland. Protecting your deposit, and accredited by reputable industry bodies such as Arla, ensures your stay meets the highest professional standards.
Speaker 3:And I just thought like that says it all. That is such a brilliant condensed way of saying it and we're not seeing. I then went down a bit of a rabbit hole of looking at other BTR and co-living operators websites to see if they were doing the same. And they're not. So it's not just a PBSA thing. So, yeah, well done Verbalife for kind of exemplifying this and actually due to the research that we did and because we partner with Student Crowd and they are building some functionality into their search function about accreditation, and we also have Unipol involved as well and they're going to be doing more on marketing as well. So, deanie, what was your kind of highlight, sort of standout stat that you learned from it?
Speaker 1:I think ultimately, what was really interesting was around that students obviously really value accreditation, that sense of trust. They're not looking for it because they're not told to look for it and they're not, it's not in their visibility line, so they're not. So there's an assumption there that things are accredited just because they're student accommodation. But actually, when you delve deeper, they're actually really wanting to know that it's credited, wanting to know what that means, and I think overwhelmingly that's what we learned from going through this process is actually we need to talk about it. I think, like you just said, it's just we need to make sure we're communicating it because it adds real value to young people, it adds real value to parents and I think actually on our youth forum we were very pleased that one of the respondents did say oh, my parents told me that it had to be ANUC accredited.
Speaker 1:So there is awareness out there. It isn't just people in the sector, and that is great, great to see. But we need everyone to know about it really, we need everyone to know what there is and I think ultimately it is the detail that is missing, because I think when we spoke to students, a lot of them just felt the accreditation was it's done it safety check. It's got electricity certificate, but obviously what the ANUC accreditation gives is far greater and far more beneficial to students than just those safety measures, and I think it's that level of detail that we're not getting through.
Speaker 3:Yeah, and I think what we sort of feel is we know how important it is to operators to be accredited and it's hard work and there's a lot involved in it a lot of admin, a lot of time and they have to stay accredited as well, otherwise they lose their pbsa status under the renter's rights bill. So it's becoming even more important. So if you're going to all that bother, then why don't you tell your customers that you've done it and what it means, and also train your staff? You know what? What do they understand it to be? Because, because you know, maybe you've got a maintenance person or a part-time CSA or something who hears the words Anarch and Unipol and accreditation, but if they don't understand what it is, then they can't communicate it when they're doing viewings and when they're talking to customers.
Speaker 3:The same with the marketing team. You know, do the marketing team understand what it is? Because if they did, then they could put a brilliant page on the website, like Verve Life has done, but instead it's very much buried. So, yeah, so that's. I think that was our main. You know, takeaway from it is students do care, parents do care. You know you're not going to do yourself any favours if you're not telling anyone about it. And if you're telling someone about it and your competitor next door is not, then you've definitely got the competitive advantage on it.
Speaker 1:Yeah, and I think the other thing that we found, which I think was most striking, was around that there is a financial value attached to this, and 71% of our respondents did say they would pay a higher price for something that was accredited over something that isn't. So there is actual value in going through those processes, talking about that accreditation and making sure people know about it, because they want to be safe and secure and know they've got those protections in place and they're willing to pay for that.
Speaker 2:We'll just have a quick look at the Verve Life website. Firstly, it looks great. But yeah, I think more operators need to be showcasing ANUC in particular, but also the other certifications that they've got, because it's tough out there. It is a competitive market. We're looking at marginal gains here. Most students want reassurance that they're not going to lose their money and that they're going to be somewhere reputable. So that's why student crowds taken off in such a big way, because everybody is looking for that sort of you know that review culture, and I think that that's where you know the likes of Anuk and any other, primarily Anuk, let's be really clear about this for PBSA in particular. Now they've got a captive market at the moment because everybody knows they need to sign up to Anuk because of the renter's rights bill so great.
Speaker 2:But if I was at Anuk, I think I would be going out to education agents, universities worldwide and just saying, hey, this is the standard to look for, make sure that your students are asking for this.
Speaker 2:But then, like I said, you know, basically PBSA has to sign up to it anyway. So I'm not sure they necessarily need to do that, but there needs to be a bit of an education piece on how to talk about it, why it matters, and I think you know this. The forum that you've just done is a really good example of the fact that there are a lot of operators missing a trick here. So I think there's some work to do in terms of how we talk about certifications, where we put them on the website. It's always just a logo in the footer of a website guarantee it like. It's very rare that anyone has it on their home page or anywhere else, and I think it's time that we actually started shouting about some of the compliance and the certification pieces around the sustainability of a building, the quality of the operator and I think we need to be just a bit more vocal about it.
Speaker 3:I think the other thing that I noticed on the BirdLife website sort of aside from accreditation but also really brilliantly communicated is it says smart living, expertly managed, and again, I don't feel like the word managed or management really comes across on PBSA websites as well.
Speaker 3:But the one thing that I didn't notice and this is completely off tangent, but I did my research last night and this is completely off tangent, but you know I did, I did my research last night, this is the rabbit hole I went down is no one, including Verve Life, is talking about security in tenure and I really feel like that's what these managed buildings this is what shared living effectively is about is people not only are in managed buildings, but that means that they're going to be able to live there as long as they want to live there securely, which is very, very different to the private rental market. So yeah, so I think what I guess the shared living sector, managed sector, really provides is really really different to renting off a private landlord or an individual home from a letting agent. And you know, I think maybe everyone's got a little bit carried away and a little bit seduced by communicating the roof terraces and the cinema rooms and you know the community events, but actually let's go back to basics, and we talked about this months ago about wi-fi, didn't we that? We've, you know, stopped talking about wi-fi. But I think actually the same should apply to what is it we do?
Speaker 2:you know we're accredited, we're professionally managed, you have secure rental, then you can leverage, you know the bells and whistles, but actually you know we're not even communicating the basics there should be layers to how you promote your property and and the basic layer, the foundation, should be compliance and and I think that's where you can say, like we're fully compliant building, we're accredited with ANAC or B Corp I've seen on the Verve Life website they're B Corp pending, obviously, misa B Corp already and Social Hub too.
Speaker 2:So, yeah, talk about these things, talk about your accreditations, then build on that and start talking about what sets you apart, what are your USPs. But everybody needs to get back to basics, in my opinion, to start that foundation of talking to the student about what they should be looking for. You know, it's one of my old managers said he'd say tell him what you're going to tell him, tell him, tell him what you've told him. And I think that is just. I think that's really apt. We've got to get better at leading the horse to water, as it were, the horse being all of our students and potential students.
Speaker 1:I think there's also an outreach and education step that I think we've spoken about in the past, particularly for PBSA, but even for shared living as well, in the sense that we need to educate students or young people or renters on the different forms of renting out there and the benefits of those options, and we don't do that enough, and, as this came across we were doing some training last week and we were speaking to some of those people about this exactly thing is that we don't educate people before they move out of home about what their options are, about going to live somewhere else and what that process is and what that means. And I think as a sector, we need to do more of that which comes into accreditation is that if you go to university and you want to live in safe and secure accommodation, you need to look out for these codes and these are the types of places that would be registered under this code. We need a bit more of that really.
Speaker 3:Yeah, 64% of our respondents in our survey looked for properties endorsed by their university when researching accommodation. So on that basis, it's really really vital, I think, that universities are very, very clearly communicating what accreditation is and, if they are endorsing a particular platform, that that platform is highlighting which properties are and aren't accredited.
Speaker 2:I think universities do a terrible job at this. I think they're so focused on filling their own beds beds, because there's a lot out there that are actually finding that pretty tough anyway that they just ignore anything else. Now don't get me wrong, there are plenty that actually do. There's some really good heads of accommodation out there who are monitoring what's happening within their own student accommodation, the university halls of residences. They're monitoring the PBSA sector and making sure that they can funnel students through into that. And then you've got the HMO sector as well that they can kind of coordinate a response to. They might have some kind of letting agency that is part of either the university or, potentially, the students union, but it's all over the place. It's a real scattergun approach. There's no consistency, and I think that's what needs to happen.
Speaker 2:I would be looking to ASRA and ANUC to start weighing in on some of this to make sure that the HMO sector is fully certified, that you don't have any letting agents that the university may be promoting, or even in the town promoting student accommodation, that are either unreputable or unscrupulous. And then, in terms of the PBSA, there needs to be a much closer relationship with PBSA. It's clear that nominations agreements are being repealed. From speaking to certain private providers, unite haven't increased their nominations agreements this year. They're stuck at around the sort of 57%, which is fine. They may not want more, but I just don't think those nominations agreements are up for grabs because universities are flat broke for the most part, so they don't want to be held liable for those beds in places like Bristol Really good example nominations agreements flying around all over the place there, but actually they're not full, and so that is a significant problem. So you know there are three approaches there with the university halls, the HMO and the PBSA sector. So there's no consistency or continuity to approaches from university to university, and I think that's what needs to change, and so I would like to see Anouk and Azra, and Cubo as well, really getting quite heavily involved there, but haven't seen anything that is coordinating that approach yet, because it should involve local planning departments as well.
Speaker 2:I look at one specific university that I do quite a lot of work with, and they previously used to charge out a commission to operators that they sent students to. So effectively they were on a referral agreement, just like a marketplace. This year that's been completely repealed because they haven't filled their own beds, and so I can see that being a problem across the country. But we need a coordinated approach that takes into account all of the bodies overseeing student accommodation and university accommodation and just have some kind of unified and coordinated response.
Speaker 2:That's my opinion, and then, once you've got that, then the certifications will be a lot clearer as to what's needed, how to make sure that there aren't any students that are, you know, caught short or that are defrauded, and that the quality of the accommodation shines through. Every university wants good quality accommodation. It really affects their rankings when the university accommodation or local housing stock is crap. So I think it's time that there was a much more coordinated approach there. Personally, that's not me volunteering to to run that, but but yeah, I think that it just needs to happen no, agreed.
Speaker 1:And if you did want to read that youth forum report, you can download it from our website. And a big thanks to both student crowd and utopia for supporting us in bringing that insight free to the sector. So thank you.
Speaker 5:Now we're going over to our ask, the expert series as one of the uk's largest real estate legal teams, howard kennedy brings deep industry insight and commercial solutions to support clients in an ever-evolving real estate landscape. We deliver tailored solutions that help our clients realize their goals, working in close collaboration to navigate every stage of the property life cycle.
Speaker 1:Hello, I'm here with Amanda McNeill from Howard Kennedy, who is our expert today on the Leasehold and Freehold Act. So welcome, Amanda. It's great to have you here. Thank you for having me. So, I guess we have been chatting about the Leasehold and Freehold Act and, to be honest, it's not really getting much news coverage. We probably don't know as much about it as maybe we should do, so I think it would be really great if you could just tell us the main features of the act and why it's happening.
Speaker 4:So it's interesting that it's not getting much coverage because it actually marks a really significant step in the ongoing reform of leasehold and freehold property, although I have to say that at this stage many of the provisions are not yet in force and throughout this year and probably next year there will be further reforms and consultations which will address unresolved issues and refine the provisions of the Act. So the main changes introduced by the Act primarily affect four areas, that's, leasehold, extension of flats and acquiring the freehold of houses which are held on leases. Then collective enfranchisement. Collective enfranchisement is where the leaseholders in a block of flats act together collectively to acquire the freehold. The other two areas are right to manage and service charges. So in relation to lease extensions, the main changes to note are that all lease extensions will be to 990 years rather than 90 years. Then, in relation to both lease extensions and freehold acquisitions of houses, the two-year ownership rule to qualify to extend a lease renewal or to acquire the freehold of a house has been removed. Now that provision, the abolition of that two-year ownership rule, has already come into force. It came into force on the 31st of January. So the whole point of this is that as a lease diminishes in length, the premium payable to extend it increases, and previously a home owner would have to wait until they had owned the property for two years before they could initiate the lease extension process, and during that two years so the lease would get shorter, so the premium payable would become more expensive. So now, as soon as someone has bought the lease of their flat or the lease of their house and they've become the registered legal owner, they can start the process. Another change in the lease extension and enfranchisement arena is that previously a tenant would have to, a leaseholder would have to pay their landlord's legal and valuation costs in relation to the process, and that's now going to be abolished, apart from in low value claims.
Speaker 4:The one aspect of the amendments brought in by the Act that has been talked about is in relation to valuation and the abolition of marriage value. So the current method of valuation does not always reflect the true value of the property and the Act is looking to create a more transparent and fairer valuation method, creating a standard method. So this includes the abolition of marriage value, which is a component for determining the premium payable when the lease falls below 80 years. Additionally, ground rent will be capped at 0.1% of the property's freehold value for the purpose of calculating the cost of extending the new lease, and the government's going to prescribe the deferment and capitalisation rates to be used for calculating the premium. We don't know yet how this is going to be done, although the government has said that they will be setting it at market rents to be reviewed every five to ten years. Then, moving on to collective enfranchisement, if the leaseholders of a block of flats want to act together to acquire the freehold and the building is a mixed-use building, that's one where there's both residential and commercial parts, one of the qualifying criteria for what is called the collective enfranchisement is that not more than 25% of the internal floor areas is commercial. So the Act will increase the commercial element to 50% of the internal floor area, meaning that there will be a huge number of buildings that previously didn't qualify which now qualify.
Speaker 4:Then, moving on to right to manage Now, these provisions have already come into force. They came into force at the beginning of this month. Right to manage Now these provisions have already come into force. They came into force at the beginning of this month. Right to manage will now be available in mixed use premises when the internal floor area used for non-residential purposes does not exceed 50% of the building's total internal floor area, excluding common parts. Previously the limit was 25%. So again, this is a significant change which will result in a huge number of buildings now falling within the scope of right to manage.
Speaker 4:The other change in the right to manage arena is that previously, the right to manage company and its members would be liable for the landlord's costs incurred as a consequence of service of the claim notice.
Speaker 4:Now, with the amendments, the starting point is that the RTM company won't be liable for any costs incurred by the landlord. And then, finally, in the service charge arena, service charges will become more regulated. Demands for payment must be in a specific form, containing specific information, and be given to tenants in a specific manner, and failure to comply will render provisions in a lease regarding late payment or non-payment service charge of no effect. Other changes are that landlords must give tenants, within six months of the end of the service charge year, a statement of account in a specified form and a written report. Tenants will have a right to require information regarding service charges, which the landlord will be obliged to provide within a specified time, and certain insurance costs connected with arranging or managing insurance will be prohibited from inclusion in a variable service charge. But perhaps the most significant change is that landlords litigation costs will not be regarded as relevant costs when demanding or determining the amount of variable service charge or administration charges.
Speaker 1:Wow that is a lot to unpack, amanda, thank you for that. I think you know I've been writing lots of notes down there of things that I was unaware of, which you know, being a host of this podcast, I probably should be. So, thank you, and I do have a lot of questions which I think we'd love to come back to, because we've got you coming back in a couple of weeks time. So I'm going to go and digest all that information you gave us and then we'll come back with some brilliant questions next time.
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