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// by Sebastian O'Kelly
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Leasehold Knowledge Partnership
Open Data Institute
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London N1 9AG
The Housing Minister has been facing the problem of combustible insulation on tower blocks and some freeholders are refusing to pay for repair of the building.
The Housing Minister has been facing the problem of toxic leases with ground rent doubling up every 10 years and making the property becoming unsaleable.
The Housing Minister has been running around consulting the the developers and freeholders and still not able to find an acceptable solution. The Minister is out of his depth because he has not recognised the difference between freehold title and leasehold title.
“Freehold title” gives the buyer legal ownership of the property .
But ” Leasehold title” gives the buyer legal ownership of a long term rental agreement which is entered on unfair terms for the buyer and commits the buyer to paying ground rent for the entire term of the lease 99 or 125 years which is 2-3 times the working lifetime of any possible living person.
The lease is a business agreement and the terms for ground rent can be declared unfair if the leaseholder cannot live out 3 times the working life time in the lease . It becomes a VOID contract agreement.
The Government has powers to impose correction on VOID agreements . So here is what the Minister should do :
1. Declare all freeholder companies which refuse to pay the cost of replacing combustible insulation on tower blocks as becoming “insolvent ” and put them into bankruptcy . This includes the entire Group of controlling companies , including ones based in tax havens and all their Directors . Only exclude freeholders and directors living in the building with combustible insulation.
2. Apply 40% tax rate on annual ground rents to pay for replacing defective insulation . No deduction allowed for bank loan interest from ground rent income .
3. Terminate the right to demand ground rent after 2o years from start of the lease. The freeholder companies can be allowed to recover any loss from the Developers.
4. Impose 20% VAT on first sale of new build leasehold property requiring ground rent payment exceeding £1 .
5. No VAT refund to developers selling leasehold title on new build property with ground rent payment.