Council tax rethink still on the horizon

Council tax is likely to stay in its present form for at least another two years while the government rethinks its approach to funding local authorities. Last week the government published its Balance of Funding report, which could have opened the door to local income taxes and other options - but while these possibilities still remain on the table they are described as problematic. Instead, the present government appears to be more inclined to increase the number of council tax bands when the properties are revalued in 2007. At that time, properties that have increased by more than the average in value are likely to find themselves moving up into higher bands. If more council tax bands are created there will almost undoubtedly be more at the top end - therefore producing higher bills for the more expensive parts of the property market. Another inquiry - under Sir Michael Lyons - was announced by the government last week to research the options further and report back by the end of 2005.

Estate agents are to be more tightly regulated under proposals set out by the Department of Trade and Industry last week. Agents will be forced to join an industry-wide Ombudsman scheme and will have to keep written records of transactions. There is already an Ombudsman scheme for estate agents but this is voluntary and many agents do not belong to it. The National Association of Estate Agents believes that the government's proposals to improve standards in its industry do not go far enough; it wants to see a licensing system. The NAEA is separately planning to set up a scheme to compensate anyone who has a valid complaint against its members. The association's current disciplinary system only allows for the fining or expelling of members, but not for the financial compensation of customers with grievances. It says the new scheme will be in place by 2006. www.naea.co.uk.

A new system of ownership for flat-dwellers is to be introduced in the autumn. The 'commonhold' system is intended as an alternative to the controversial leasehold system of ownership where long-term control remains with a landlord. The commonhold system gives each flat-dweller a permanent share in the ownership of the building. Solicitor James Driscoll of City law firm Trowers & Hamlins forecasts that commonhold will quickly become adopted by new residential developments. 'The standardised commonhold contracts will avoid some of the very poorly drafted and restrictive covenants that come attached to leasehold flats and sometimes commercial leases. For example, purchasers of long leaseholds often find that they are not allowed to keep pets, that the share of service charges among tenants doesn't add up to 100 per cent and that they need to get permission to sublet their property.' The new system is due to be introduced on 27 September. Where flats are owned under the old leasehold system, conversion to commonhold will require agreement among all owners in a building as well as the freehold landlord.

Demand for rental properties is picking up again, according to property consultant FPD Savills. This follows two years of static or falling rents across much of Britain. FPD Savills' head of residential research, Richard Donnell, says: 'The improvement in rental demand will be welcome news for landlords and it is a situation we expect to continue. We doubt the relative costs of renting versus buying will change significantly in the short term. Our current research shows it is currently cheaper for first-time buyers to rent a typical city-centre flat than to buy one.' www.fpdsavills.co.uk.

Mortgage broker The MarketPlace at Bradford & Bingley is warning that offset mortgages may not be appropriate for many borrowers. These products offset savings against borrowings with the aim of reducing the size of loan that interest is charged on. But the Marketplace says those looking to manage their money effectively are likely to be better off opting for a combination of a market-leading mortgage and a high-interest savings account. David Bitner, head of product operations at The MarketPlace, says: 'The offset market has continued to proliferate over the last 12 months, with new and more competitive products arriving on the scene. However, these deals are still not right for the vast majority of borrowers, who just do not have the level of savings to make them work. Many borrowers will need at least 20 per cent of their total mortgage balance in savings and in some cases as much as 40 per cent to make it worth their while.' www.marketplace.co.uk 0800 113 333.