By Sebastian O’Kelly
LKP and the National Leasehold Campaign are organising a public meeting for leaseholders with the Law Commission tomorrow afternoon.
Law Commissioner Professor Nicholas Hopkins and his team will explain their work on enfranchisement, lease extension and commonhold.
Other speakers will include Professor Susan Bright, of Oxford University, and barrister Amanda Gourlay. There will also be officials from the DHCLG.
LKP and the NLC held a public meeting last week in Manchester; there was another at a law firm in Newcastle, and the Leasehold Advisory Service held one at the Ministry of Justice on Wednesday for 50 leaseholders.
Law Commissioner Nicholas Hopkins told the meeting on Wednesday that the aim of the Law Commission is to “tip the scale back towards the leaseholder” in the enfranchisement process, making it “easier, quicker and more cost effective”.
The response of the audience, who were well informed, was prickly but generally supportive.
One chartered surveyor, up from the shires, was concerned about ruinous rural properties sold on the cheap to people who did them up but knew they would ultimately return to the landlord. “Don’t you dare bugger this up!” the Law Commission was told.
Two leaseholders despaired of reform of this sector, urging that leasehold be ended and replaced with commonhold, which has been on the statute book for 16 years.
The Leasehold Advisory Service was strongly criticised: for not supporting commonhold; for serving the interests of freeholders; for doing nothing to stop ten-year doubling ground rents, or even alerting government about them.
What is the Leasehold Advisory Service for, asked one attendee.
Anthony Essien, the CEO, replied that the organisation was not perfect, but had supported leasehold reform and provides a lot of help for leaseholders.
The Law Commission will propose a suite of options for government as the decision how favourable the process of enfranchisement is to leaseholders is political.
Enfranchisement is a (deliberately, in LKP’s view) complicated process and the Law Commission urges leaseholders to respond if only to one of its questions before the consultation ends on January 7.
There are a series of summaries of their aims here: https://www.lawcom.gov.uk/project/leasehold-enfranchisement/
The Law Commission is not going to help those who think they were mis-sold their property, or were let down by conveyancing solicitors, or are exasperated by try-on permission fees, or think there are unfair terms in the lease.
LKP would, nonetheless, urge leaseholders to put their views to the Law Commission.
The leasehold scandal is gathering pace, and the government is unceasingly referencing the Law Commission study as part of the solution.
On the other hand, Labour’s community shadow John Healey is urging a public inquiry into the mis-selling of new homes with onerous ground rents: 100,000 of them in the view of LKP and Nationwide, of which 12,000 have ten-year doubling terms.
The National Leasehold Campaign co-founders Katie Kendrick and Joanne Darbyshire made the same point to the Communities Select Committee on Monday.
A public inquiry would be an occasion to examine how taxpayers have thrown money at plc house builders with the Help To Buy scheme, who have then cheated their own customers with these toxic leases. And the rest of us by not providing real home ownership, but a deeply flawed tenancy paying out a huge income to freehold speculators.
In the words to the Communities Select Committee of veteran leasehold campaigner Shula Rich, leaseholders have been sold the “fag-end of a timeshare”, not home ownership.
Meanwhile, the recently sacked Jeff Fairburn of Persimmon walks away with a ludicrous bonus of £75 million (actually, more like £110 million with some going to charitable causes).
This appalling nonsense in UK housebuilding desperately needs examination.
The government, meanwhile, is rowing back on ex-Communities Secretary Sajid Javid’s pledge to reduce new ground rents to as low as zero: it’s £10 nominal annual ground rent keeps the whole exploitative leasehold system in business.
Communities Secretary James Brokenshire met plc house builders and ground rent investors yesterday, but has yet to meet leaseholders.
This lukewarm response to leaseholders has caused groans of despair, especially among Conservative voters and young would-be buyers, who have haemorrhaged their incomes on rent and now see leasehold not-really-homeownership as yet another generational unfairness.
Professor Hopkins and his team are inevitably drawn into the wider controversies.
The Law Commission has made good proposals:
To make the enfranchisement of flats and houses follow the same procedure;
To increase the length of the statutory lease extension from 90 years (for flats);
To allow estate enfranchisement, which will allow more to escape yet another wheeze dreamed up by our plc house builders: “fleecehold” estate charges, which are now being traded as investment assets.
To allow a “right to participate” for leaseholders in already enfranchised blocks of flats.
The Law Commission is going to offer government a series of options for reform.
But it has already said that Justin Madders MP’s simple multiple of ground rent to enfranchise (10 times was suggested) would likely infringe freeholders’ human rights. This is the system to buy out leases in Scotland and Northern Ireland.
The alternative is to try to reform the valuation models – commissioned to serve the interests of freeholders and accepted by courts – that we currently have.
However, this might mean a recommendation that only one review of ground rent can be the basis of the calculation. For some reason, this loss of income to the freeholder is unlikely to be an infringement of his human rights. But you can bet there will be a good deal of legal muscle deployed to ensure that it is.
On the positive side, the Law Commission emphasises that leasehold is a tenancy and that home ownership is a misnomer. We would hope this strengthens our efforts to ensure that house builders and estate agents only market tenancies when referencing leasehold.
We would add that, given the way plc house builders have gamed the system and cheated their own customers, Help To Buy should not be available on leasehold houses at all and possibly not on leasehold flats, either.
The Welsh government has already decided that house builders need to demonstrate why a house is being marketed as leasehold to qualify for the Help To Buy scheme. Good.
Where ground rents are above 0.1% of sale price and where leases are short (ie 125 years), and where other income streams in the form of consent fees have been secreted away in the small print of the lease, why on earth should taxpayers subsidise the purchase of these toxic products?
There are bound to be a few false notes in a Law Commission report of 500pp, but this one is just irritating:
“… we would emphasis that, while there have been abusive practices in leasehold, there are other landlords who operate fairly and transparently”.
This is just the smarm of politicians, thrown out without a scrap of evidence.
It is also irrelevant. It does not matter whether freeholders are nice or nasty, honest or cheats: ultimately they have an unbalanced degree of power over other people’s lives and their homes.
If the world’s second biggest charity, the Wellcome Trust, thinks its alright to spend over £100,000 to make an example over a naive litigant in person disputing £6,000 service charges in the property tribunal – and, of course, be awarded costs – the imbalance of this sector is clear enough for those with eyes to see.
LKP is pretty certain this case would have gone to forfeiture had we not publicised it and involved mainstream media.
Wellcome Trust got rid of this irritating leaseholder, but closed it all down with the inevitable Non Disclosure Agreement.
So much for ethical freehold owners.