TIME has suspended trading in its TIME Freehold fund following the launch of a Government consultation into leasehold arrangements.

The fund is the latest in a series of daily dealt property funds being suspended.

In October St James’s Place suspended dealing in its £924m SJP Property unit trust and M&G announced it would wind up its £565m M&G Property Portfolio Fund and sister fund, the M&G Feeder of Property Portfolio.

Both the M&G and SJP funds were suspended due to declining interest in open-ended daily dealing property strategies from UK retail investors.

Oli Creasey, property research analyst at wealth manager Quilter Cheviot, said that the TIME fund may well be able to reopen without suffering a significant hit due to the underlying causes for the suspension.

He said: “The TIME Freehold fund has today announced a suspension in trading. While this is another open-ended, daily dealt property fund going into suspension, the causes underlying the move are quite different compared to the funds that found themselves in trouble last month.

“The TIME fund invests predominantly in residential freehold properties (collecting ground rent from very long-dated ground leases), an area where regulatory changes have been a concern for some time. However, last week the Government announced a formal consultation into how leasehold arrangements should be handled, which included the risk that all residential ground rents could be capped at a relatively low figure, or even permanently reduced to a nominal fee, such as a peppercorn.

“Several hundred years ago, the peppercorn was a valuable, rare spice, but the term has morphed over time to refer to a very small value amount, which almost always goes unpaid by the leaseholder.

“Such a change to the freehold/leasehold landscape would be hugely impactful on the values of freehold investments, and although it is too early in the consultation phase to have any indication of what the outcome might be, the risk of the ground rents being reduced or effectively eliminated is being taken very seriously.

"As a result, BNP Paribas, the independent valuer of the freehold fund, have activated the Material Uncertainty Clause (MUC), stating they cannot confidently value the freehold assets given the regulatory landscape and that as a result it would be unfair to investors to set a NAV for the fund at which units could be bought or sold (as that NAV could prove to be badly wrong).

“It should be noted that the suspension is not a result of any action by the managers at TIME, who have maintained appropriate liquidity levels and delivered consistent returns over the past years. It may also be the case that the consultation concludes with a much less impactful outcome and the fund is able to reopen without suffering a significant hit to NAV.”

This is not the first time a wave of suspensions have hit the property sector. In 2019 a number of property funds were suspended after a wave of redemptions hit the property fund sector. The wave was blamed on Brexit-related uncertainty and ongoing structural shifts in the UK retail sector.