Charity sector organisations have expressed concerns about the potential impact of changes to leasehold property law, as the government laid out further plans this week.
The government published a white paper yesterday, as part of its upcoming leasehold and common reform bill, which set out its plans to ban new leasehold flats and make commonhold the default property tenure.
Helen Donoghue, secretary of the Charities’ Property Association (CPA), said that while this week’s proposals focus on new properties, the government’s longer-term intention to enable existing tenants to convert their leases into commonhold “will raise a number of issues for charities”.
This follows last year’s Leasehold and Freehold Reform Act, which is being legally challenged by a charity in court over its proposal to end marriage value – an increase in a property’s value that arises when its lease is extended.
John Lyon’s Charity has warned that the marriage value changes could cost the sector millions, with the substantive hearing of its judicial review due to take place in July.
‘A number of issues’
Donoghue of the CPA said a lot of the details of the upcoming leasehold and commonhold reform bill that could affect charities will not be clear until the draft legislation is published later this year.
On this week’s white paper, she said: “The latest proposals apply to new leases only and are less likely to have much impact on charities but the eventual intention is to enable existing leaseholders to convert their leases into commonhold.
“It is this that will raise a number of issues for charities that own leasehold properties and we will be discussing this with our members at our forthcoming AGM at the end of this month.”
Transfer of wealth
John Lyon’s Charity initiated a judicial review of the Leasehold and Freehold Reform Act in September, warning that it could lose around £1.4m annually due to the end of marriage value.
Other property-owning charities including the Church Commissioners have warned that the marriage value changes will impact them.
Lynne Guyton, chief executive of John Lyon’s Charity, said: “We are deeply concerned about the potential adverse effects of the proposed end of marriage value in the Leasehold and Freehold Reform Act on our ability to fund vital community projects across London.
“The charity grants over £15m a year to some of the most disadvantaged children and young people’s charities in the country, granting over £200m since 1991.
“We do not fundraise, and we do not make profits. We rely on and use the income from lease extensions in (the very wealthy) St John’s Wood, where the original John Lyon Estate was founded 450 years ago to support children’s services and educational initiatives in schools, youth clubs, and charitable organisations.
“It cannot be right that for John Lyon’s Charity, this act will mean there will be a massive transfer of wealth from us and our vulnerable grantees to some of the richest homeowners (many of whom are non-doms) in Europe.”
Guyton added that the Crown Estate, the National Trust, and the Duchies of Lancaster and Cornwall had already received an exemption.
At the hearing in July, John Lyon’s Charity will seek a High Court declaration that the act is incompatible with property rights under the Human Rights Act 1998.
Related articles
