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You are here: Home / Latest News / Brokenshire demanding action for 100,000 trapped in toxic leasehold homes five months ago

Brokenshire demanding action for 100,000 trapped in toxic leasehold homes five months ago

March 9, 2019 //  by Sebastian O'Kelly

 

Communities Secretary James Brokenshire listening to fellow Tory MP Huw Merriman saying that ground rents for retirement properties should be set to zero, along with all others. The government is pondering a backtrack on this – after some pretty half-hearted lobbying from the retirement house builders who thought the ground rent game was up last summer. In fact, the largest retirement house builder McCarthy and Stone is already moving to become a service provider for the long term at its sites. It has argued that ground rents are essential to compensate it for the communal parts in a building that otherwise could be sold as flats – which means, reasonably enough, that non-retirement house builders don’t need ground rents at all. In fact, ground rents could easily be substituted for a common areas charge and might even be better in the long term for McCarthy and Stone to retain the legal authority of the freehold.

A very good Daily Mail story today revealing that last November Communities Secretary James Brokenshire was demanding inquiries into 100,000 buyers trapped in new toxic leases.

So, no reason not to get on with banning leasehold houses – the easy bit – and reducing new ground rents to zero: which private equity speculators and our truly grisly plc house builders don’t like for obvious reasons.

Then the developers can stump up to provide the freeholds to leasehold houses, which were often promised to their customers … before promptly being flogged off to private equity speculators.

Under Freedom of Information requests, The Mail reveals that Mr Brokenshire was warning the Competition and Markets Authority that up to 100,000 people were ‘trapped’ in homes they could not sell.

Furious minister demands inquiry into homes sold on toxic leases

James Brokenshire’s demand for inquiry into ‘extortionate’ leases was dismissed He warned CMA in November up to 100,000 people were ‘trapped’ in homes Five months later CMA declined to investigate the Housing Secretary’s concerns The housing industry has been accused of exploiting consumers by a leading minister.

Mr Brokenshire said: “Leaseholders cannot sell and cannot move. They struggle to purchase their freehold or extend their lease, as the cost of the future ground rent must be met.”

He added: “This shines a light on the culture of consumer exploitation rife in the housing industry.

“In the past, the CMA used its influence to tackle this type of exploitation, and it is my hope it will do so again.”

Mr Brokenshire also wrote to the Solicitors Regulation Authority to complain about lawyers – many recommended by developers – who failed to warn buyers about contracts with “extortionate” terms.

He said: “I am troubled by some of the evidence I have received.”

Huw Merriman calls for zero ground rents for retirement leasehold at prime minister’s questions

The article feature a case study of the Sisley family in Cornwall, whose £117,000 Taylor Wimpey flat has ground rents of £250pa – so well over the 0.1% of sales price, which is the Nationwide definition of onerous rent – and doubles every ten years on five occasions.

In other words, Taylor Wimpey and its stooge lawyers landed this family in a truly toxic home. And knew it. And won’t admit it.

Related posts:

Now it is Shanly Homes dumping its customers into unsellable homes Developers moderating their cheating makes it worse for leaseholders who are trapped, says Fiona Bruce MP Competition and Markets Authority cannot investigate leasehold mis-selling because of Brexit, Brokenshire told The Sun says … ‘thousands trapped in leasehold homes due to spiralling ground rent costs’ Leasehold first-time buyers trapped in leasehold homes with £800 ground rents, says BBC

Category: Latest News, News, PressTag: Competition and Markets Authority, Daily Mail, James Brokenshire MP, Solicitors Regulation Authority, Taylor Wimpey

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Reader Interactions

Comments

  1. stephen

    March 12, 2019 at 4:09 pm

    Many of the 100,000 lease quoted as being toxic arise because they have ground rents linked to the RPI

    Why is it that if pensioners seek to have state pension linked to the RPI or average earning whichever is the greater this is seen as acceptable and desirable – but not when a freeholder seeks to impose such terms

    • admin

      March 12, 2019 at 4:25 pm

      I have asked before, but will try again: do you agree that leaseholders should have the right of enfranchisement, to extend their leases or to buy the freehold?

      It is, after all, the compulsory purchase of a citizens’s private property by another.

      • Stephen

        March 12, 2019 at 5:50 pm

        In a free market ecomomy if a vendor chose to dispose of property he should have the right to set the terms he wants and for those terms and obligations honoured on both sides.

        A lessee taking on a lease of 99 years and then 20 years claiming that it is all unfair that the freeholder wants a premium to extend is all very weak and tiresome

        Other tiresome whining comes from those who buy leases from a charity knowing that can’t be extended, paying a price which reflects that problem and then running to the Daily Mail years later to argue it’s all unfair . Much the same with the National Trust leases .

        I would argue that poor quality legal advice given because buyers won’t pay for proper advice is the root of the problem and developers knowing that have exploited it

        HOWEVER lease terms must be clear so that the prospective purchaser appreciates what they are so they are considered and valued correctly. Hence my claim that the NPV of the ground rent should be clearly shown next to the premium

        The management must be transparent and managed according to the lease . Recognising that a lessee has made a purchase and the costs of disposing of the property and acquiring another are very large and those consent fees must be either disclosed in the lease before purchase or must be such that do not abuse the monopoly position that the freeholder is in

        • admin

          March 12, 2019 at 6:55 pm

          That’s not an answer. Again.

          It is evident that you disagree with a reform that has been on the statute book for 25 years.

          For what it is worth, National Trust leaseholders were told they would be able to extend: it was the new modern ground rent rising to c£8,000pa in some cases in properties considerably enhanced by the leaseholders over many years, that was controversial (and the National Trust backed down).

          LKP disagrees that National Trust, Duchy of Cornwall etc leaseholders should be able to enfranchise in buying the freehold, if they signed leases that said they couldn’t in the first place.

          Your stuff about whining in the Daily Mail is just your frustrated landlordism not having its own way, in spite of the costly terracotta army of professionals talking up the leasehold system. We suspect it is going to get worse for you. With any luck.

          • stephen

            March 12, 2019 at 7:54 pm

            Your response is hardly measured critique of my argument.

            It’s clear from my answer that I don’t believe that enfranchisement is compatible with Human Rights legislation

            The main point I make is this. If a freeholder sells a property voluntarily on a lease of say 99 years at a ground rent of £300 why is this considered to be unfair if the terms are made crystal clear at outset . Why should his/her heirs, if they so wish, not get the property when the lease expires?

            What are your thoughts on that?

            If the downside of leasehold tenure which you make is considered at the time of purchase then the price paid for the property can be assumed to reflect those negative issues. It would appear they are not and that is where the claims of unfairness germinate from – that is not the fault of the landlord it is probably the failure of those who advise lessees. If it is the fault of the professional advisors why should the landlord be blamed?

            Do you have any comments to that point?

            You consistently make the argument that a ground rent is for no service. Yet the reading of the lease will confirm this point that the rent is not used to offset expenditure on the building. It is a pure income stream to the landlord – therefore a burden on the property. In other words, a part of the consideration paid for the lease and needs to be valued and reflected in the offer made. Again a professional advisors fail to advise that a ground rent of say £350 per annum linked to the RPI every 10 years is a burden of some £10,000. As I have said the NPV of this should be shown right next to the premium paid for the lease in the prescribed clauses and SDLT paid on that total sum. Therefore, any chance of an unscrupulous landlord slipping in a 10 year doubler would not have arisen because the NPV of such a rent would have set off alarm bells. So ground rent have a place in the future they are part of the funding of a property purchase. I maintain that the granting of lease extension where a rent is reserved should be done the auspice of the Consumer Credit Act because in effect reserving a rent gives discount to the premium paid and the rent is really an interest payment on that discount

            The Mary Magdalene and Holy Jesus Trust in Newcastle which I pass on a very regular basis is attacked by you because it will not give lease extensions to lessees even though they bought their leasehold properties knowing of that restriction. It is reasonable to assume the price paid reflected that restriction. You report the news as ‘Uncharitable’ Mary Magdalene and Holy Jesus Trust and the issue of lease extensions”

            What are your comments on that?

            The root of the disputes in leasehold stem from two sources. The FIRST is the granting of leases where poisonous ground rents have been introduced knowing that solicitors and purchasers will not understand the value of them. This is clearly wrong and my proposals about the NPV being disclosed would address this. The SECOND root of discontent surrounds fees for consents under the lease and the failure in the drafting of leases to state what such fees shall be is a failing and needs to be addressed. Again the purchaser should have the information disclosed prior to taking on a lease as to what such charges will be in order to evaluate accurately the price to pay for the lease. The THIRD root stems from the management of block of flats with legislation enabling lessees to manage the property on a no fault basis and the safeguards of the low cost regime of the FTT much has been done to address problems. However further legislative changes are still needed

            Therefore, leasehold it is not a broken system, it is a system that needs to be refined. It can be done quite easily and quickly

          • admin

            March 13, 2019 at 9:32 am

            Please do not smear. It was the local MP who described the Mary Magdalene and Holy Jesus Trust ‘uncharitable’ in the House of Commons

            https://www.leaseholdknowledge.com/uncharitable-mary-magdalene-and-holy-jesus-trust-and-the-issue-of-lease-extensions

    • Michael Hollands

      March 13, 2019 at 6:46 am

      The state pension is based upon the increase in RPI.
      RPI is based upon increases in a package of popular goods and services which the public use.
      Ground Rents are charged for no goods or services whatsoever.
      So how can a RPI increase be justified upon them. When they represent no costa at all.. It would make more sense if they were reduced rather than increased as they lower the value of the properties on which they are charged.

      • Stephen

        March 13, 2019 at 9:10 am

        An imposition of a ground rent is intended to be part of the overall consideration paid for the property . If a ground rent was set at £4000 per annum then clearly the freeholder granting the lease would get less by way of a premium

        I would concede that when the rent is a lot less say a couple of hundred pounds a year then the effect on the premium compared to granting a lease with a peppercorn may be no difference at all

        But that arises because the rent is not adequately considered by the purchaser and his/her advisors – it does not reduce the legitimacy for its payment and requirement that if it is to be taken away in the future from the landlord adequate consideration should be paid

  2. Stephen

    March 13, 2019 at 11:45 am

    To admin

    With respect you chose to report the article with that heading – you did not advance any argument in support of the Charity’s case.

    Indeed I have not seen any article by the LKP in support of the National Trust or other charities stance over claiming the exemption afforded by the 1967 and 1993 Act

    More to the point I have posed various questions in this thread to you which you seem reluctant to respond to.

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