Freehold-owners of buildings are selling space above leasehold flat-owners’ heads for millions of pounds thanks to new rooftop extension rules.
Permitted development rights
Permitted development rights, that the government approved in August 2020, mean that up to two new storeys of flats can be built on top of existing residential blocks, or commercial buildings, without the need for the freeholder to apply for planning permission.
The move has seen freeholders selling ‘thin air’ as building plots and a rush by housing-entrepreneurs to set up rooftop airspace development companies.
Why are freeholders keen to build more storeys?
Freeholders typically collect ground rent from the buildings they own however following controversy over escalating ground rents, the government has effectively banned ground rent on new builds. However, ground rent is still applicable on older properties and increasing the number of leasehold flats on their existing buildings is a way for freeholders to maximise their assets.
Why has the government introduced permitted development rights?
The government introduced the new rights as a means of easing the housing crisis, however the knock on effect for leaseholders is catastrophic as they face a loss in property value and the inconvenience of living with a building site above their heads.
If you paid a premium for the penthouse, you could find yourself in a mid-building flat and there will be nothing you can do about it.