Ringley Group: Planning deregulation to encourage rooftop development will increase costs for leaseholders wanting to buy their building’s freehold

• The government has unveiled plans to allow building owners to add additional floors without going through the usual planning process
• When the reforms come into effect this will add to the ‘hope value’ of a building, increasing the cost of purchasing the freehold
• Leaseholders may have to pay to determine if building is structurally sound enough to support an extra two storeys, warns leading property expert

Changes to the planning system announced this week mean leaseholders looking to buy the freehold of their building must act now to avoid paying significantly more, the boss of one of the UK’s leading residential property consultancies has warned.

The government has promised to expand what are known as ‘permitted development rights’ to allow freeholders of purpose-built residential blocks constructed between 1st July 1948 and 5th March 2018 – as well as homeowners – to extend their buildings by an additional two storeys without needing full planning permission.

The move, part of a wider package of planning deregulation to increase the supply of new homes and repurpose disused commercial property into housing, will make it more difficult and expensive for leaseholders to ‘enfranchise’, or buy the freehold of their building, says Mary-Anne Bowring, founder of Ringley Group.

Mary-Anne Bowring, managing director of Ringley Group, explains: “Under current legislation, the valuation method used when flats owners who want to ‘enfranchise’ and buy the freehold of their block of flats includes ‘hope value’ in its calculation. ‘Hope value’ can include the market value of land or roof or airspace development rights based on the expectation of getting planning permission for development.

“By allowing freeholders to bypass the usual planning process, the ‘hope value’ of the extra flats that could be built on top of a building becomes a positive presumption, which will impact on the valuers’ quantification of the ‘hope value’, which helps determine the ‘enfranchisement premium’ – the cost of buying your freehold.  In theory, the premium for leaseholders would increase.”