It is within government’s power to restrict existing ground rents and we proposed a limit of 0.1% of the property value, up to a maximum of £250 per year.
Clive Betts MP, the chair of the Communities Select Committee, is delighted that the Competition and Markets Authority findings of mis-selling by developers echoes the report of his committee last year.
Writing in The House magazine, which circulates in Westminster, Mr Betts said:
“We found a [leasehold] system which stacked the odds in the favour of developers, freeholders and managing agents, leaving leaseholders with all the financial responsibilities and without matching safeguards to protect them. Leaseholders were too often treated not as homeowners or customers, but as a source of steady profit.
“We received hundreds of written submissions from leaseholders who wanted to tell us about their onerous and escalating ground rents, high service charges and one-off bills, unfair permission charges, alleged mis-selling of leasehold properties by developers, imbalanced dispute mechanisms, inadequate advice services, and unreasonable costs to enfranchise or extend leases.
“As our inquiry progressed it became clear that, for too many leaseholders, the dream of buying their first home had become a living nightmare. The scale of concern in the sector was truly staggering.
“Worse still, in some cases it appeared that the reality of the terms that customers were signing up to was deliberately hidden from them at point of sale.
“We called on the Consumer and Markets Authority (CMA) to undertake an investigation into mis-selling and, last year, they agreed.
“In February 2020, they published their initial findings and I was pleased to see that their analysis agreed with ours. The CMA has now announced plans to bring enforcement action against companies who have engaged in malpractice. I hope that those who have suffered wrongdoing will soon have the redress they deserve.”
Clive Betts MP: The Government must make good on its promises to better protect leaseholders against unfair terms
In 2018 and 2019 the Housing, Communities and Local Government Committee investigated calls for reform of the leasehold sector. We found a system which stacked the odds in the favour of developers, freeholders and managing agents, leaving leaseholders with all the financial responsibilities and without matching safeguards to protect them.
Mr Betts added:
“Our inquiry found that commonhold is a system that works well in other countries but remains underutilised in England and Wales. Commonhold removes the need to renew leases and gives homeowners a greater role in deciding how their properties are managed. The Government should reconsider how they can provide greater support to enable this form of property ownership to become more commonplace.
“In the December 2019 Queen’s Speech, the Government announced an intention to ‘reform unfair practices in the leasehold market’, remove ‘unnecessary ground rents on new leases’ and ‘give new rights to homeowners to challenge unfair practices’. These announcements are welcome, and I look forward to seeing the detail of what the Government proposes.
“However, ensuring that the proposals also apply to existing properties will be critical.
“A clear example of this will be the Government’s approach to onerous ground rents. We found that it was within government’s power to restrict existing ground rents and we proposed a limit of 0.1% of the property value, up to a maximum of £250 per year. I would urge the Government to introduce these safeguards to those already affected by onerous and unfair terms.
“The ongoing delay in the removal of dangerous cladding from existing buildings further illustrates the precarious position that leaseholders can find themselves in through no fault of their own. We have seen numerous cases of homeowners facing bills of tens of thousands of pounds to resolve issues that were not of their making.
“This is having a serious impact on the lives of too many people and the Government must urgently look again at how it can fund and accelerate the pace of remediation. I expect the new Committee to continue to closely scrutinise the Government’s approach to these issues.”
Clive Betts is Labour MP for Sheffield South East and chair of the Housing, Communities and Local Government Select Committee
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Communities Select Committee MPs issue devastating report into the toxic leasehold system
Government’s slightly wobbly response to the excellent report of the Communities Select Committee
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What about all the ground rent money and permission fees that leaseholders have paid out over many years in this ‘unfair system’ as Mr Johnson PM stated; and yet it seems that freeholders are again going to carry on with their unfair system with a limit on ground rents of £250 max, you can bet they will extract the maximum and a bit more, they will find some way of ensuring that money goes to unknown persons in far off lands in the sun… and who pays to ensure that the system carries on? … why leaseholders pay in order that they can pay again!
Why is it that leaseholders can’t be told where exactly are the fees go to, the government should make it law that managing agents must declare who the actual freeholders or landlords are.
Many if not all leaseholders were hoping that leaseholds would be banned outright, as in Scotland, if they could do it, why can’t we..?
I am a little bit dissapointed with the governments statements regarding leasehold reform, the idea of providing ‘fair’ system when the track record of freeholders is one of using legalised crime and having not a jot of conscience when dealing with leaseholders, all these past injustices should be re-examined, how these people can sleep at night I really don’t know.
Can anyone tell me why it is that Wales and the North West of England in particular seem to have been targeted in the past in order that properties were sold leasehold?
Can anyone tell me why freeholders own my house? did they help in any way to pay my mortgage, and if they own it, should they not be paying insurance for it? did they help when repairs were required, not on your life, rather they would ensure that the repair could be called an alteration and make some more money out it!
Words fail me in trying to find a generic name for these freeholder landlord types, it would certainly be beyond my moral obligations, of which they have proved a complete lack of.
The CMA has announced plans to bring enforcement action against companies who have engaged in malpractice.
Good, and this must also apply to existing residential freeholds sold and purchased criminally in breach of section 4 of the Landlord and Tenant Act 1987 (as amended by the Housing Act 1996) {part 1, the LTA 1987}
There is a sizable group of unscrupulous freeholders who since 1996 have developed property portfolios through criminal acquisition; taking advantage of gullible and vulnerable individual leaseholders. These companies who have engaged in this malpractice, aided and abetted by equally unscrupulous members of the Law Society (Law Commission please take note), must now be forced to issue section 3A Notices (part 1, the LTA 1987) to enable existing leaseholders to purchase their freeholds “on like terms” to the original criminal disposal.
Claims for compensation will also exist against all excess charges levied throughout the term of the illegal purchase.
Should clarify, the above comment refers to existing leaseholders in residential blocks of flats where the freehold title has been sold to unscrupulous speculative buyers in criminal breach of leaseholder right of first refusal.
CMA quote: “A solicitor’s role is NOT normally to advise on the merits of the purchase. Conveyancing is one part of the overall process by which a consumer chooses and then purchases a flat or house.”
WHAT DO WE PAY THEM FOR THEN, IF NOT THEIR ADVICE!!
WHAT LEGAL COMEBACK DO WE HAVE AGAINST THE CONVEYANCING SOLICITOR WHO DOES NOT ADVISE AGAINST A PURCHASE, WHERE THE GROUND RENT DOUBLES EVERY 10 YEARS?