HS2: How should you respond to the new uncertainty?

April 10, 2019 10:32 am - Categorised in: , ,

Kevin Allard, Solicitor

There is increased uncertainty surrounding HS2 with the prospect that Theresa May could be replaced by a prime minister opposed to the scheme. How best to respond to this will vary depending on how close your house is to the proposed route, what your priorities are and how likely you think it is that HS2 will be stopped with the appointment of a new prime minister.

Outlined below are some pointers primarily for homeowners in the Midlands and the North affected by Phase 2 of HS2.

Initially, it is important to consult the plans produced by HS2 to see which zone your house is in and which schemes apply to you. Depending on how close your property is to the proposed railway, you may have the right to:

  1. Have the government buy your property for its full-market value, pay you an additional 10% on top of that and cover your legal fees and other moving costs if your property is required for demolition;
  2. Have the government buy your property for its full-market value if your property is not required for demolition;
  3. Receive a cash payment of 10% of the market value of your house subject to a minimum of £30,000 and a maximum of £100,000 if your property is not required for demolition.

Additionally, if you sell your house to the government, you may be able to rent it back at a full-market rent for an initial term of six months or one year. The government can extend the tenancy indefinitely beyond that but you do not have a right to insist on the tenancy being extended and you could be required to leave on two months’ notice once the initial term has ended.

If you are entitled to the cash payment and this is something you want to pursue, you should make an application as soon as possible given the possibility that the scheme may be withdrawn. You will need to appoint a solicitor to confirm that you are the owner of the property and that your mortgage lender’s consent has been obtained or is not required. The government covers your solicitor’s fees up to £500 plus VAT which is usually sufficient. Once you have received the payment there is no requirement to repay it if HS2 is subsequently cancelled.

If your priority is to sell your property, you should also consider making an application for the government to buy it as soon as possible. If HS2 is cancelled you may still find it difficult to sell your house for a reasonable price on the open market in the next few years as buyers may fear that HS2 could be revived by a subsequent government.

If your priority is to remain in your house for as long as possible, you need to consider the possibilities more carefully. If you have already started the process for the government to buy your property, you may want to withdraw or at least pause the process if you think it is likely that the railway will never be built. If you are considering pausing, you need to be aware that pausing for a long period may be regarded as withdrawing. You should be aware that if you withdraw, the government may not pay the professional fees you have already incurred.

However, even if your priority is to stay in your property for as long as possible, the best option for some people may be continuing with the sale and then renting back the property from the government. This will be particularly attractive for older homeowners who may view sale and rent-back as a form of equity release. The main differences between this and a normal equity release scheme are:

  1. The monthly rental payments are likely to be higher than the interest you would pay under equity release; and
  2. There is no guarantee of being able to remain in the property once the initial tenancy of six months or one year has come to an end; but
  3. Sale and rent-back releases the full market value of the property which is rarely the case under equity release schemes that normally only pay up to a maximum of 60% of your property’s value.

 

If you would like advice on matters related to HS2 for residential or commercial properties, please contact Kevin Allard on 0115 922 1591 or k.allard@ellis-fermor.co.uk

Nothing in this article constitutes legal advice or gives rise to a solicitor/client relationship. Specialist legal advice should be taken in relation to specific circumstances.

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About Kevin Allard

Kevin advises on all aspects of commercial and charity property including sales, purchases, business leases and secured lending. He also advises on residential property affected by the HS2 railway. Kevin has particular expertise in acting for faith-based groups and charities, including advising on charity formation and incorporation. Kevin qualified as a solicitor in 2007 having…

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