In the King’s Speech yesterday the government undertook to reform the leasehold system by seeing through enfranchisement and right to manage reforms missing from the Leasehold and Freehold Reform Act 2024.
It also said it would deal with “unregulated and unaffordable ground rents”, but fell short of Michael Gove’s stated wish of setting existing ground rents to zero – which almost certainly would prompt litigation from freehold owners on human rights grounds.
It also wants to end “the disproportionate and draconian threat of forfeiture as a means of ensuring compliance with a lease agreement”, about which there has been near universal consensus for nearly two decades, but nothing has been done in spite of a Law Commission report.
The government adds that it “will take steps to bring the feudal leasehold system to an end, reinvigorating commonhold through a comprehensive new legal framework and banning the sale of new leasehold flats so commonhold becomes the default tenure”.
Finally the government is going to “consult on the best way to address the injustices of ‘fleecehold’ private housing estates”, and its associated unfair maintenance costs.
These fall on younger, new home buyers who pay fleecehold charges in addition to council taxes, whereas older owners in older, freehold homes don’t.
Councils and housebuilders are complicit in creating these management companies, which provide a legally enforceable income stream, and South Somerset council even proposed to enter the “fleecehold” racket monetising the private estates it had declined to adopt:
The government’s briefing document (below) on the King’s Speech states:
“There are also as many as 1.75 million homes on private estates, and over recent years we have seen a growth in the number of new homes built on these estates. Costs vary considerably, depending on a number of factors, but the Competition and Market Authority estimates average cost at around £350 per annum.”
Relevant pages are pp74-76:
Related posts:
Views of Tory MP Crispin Blunt: Government should ‘nullify’ ground rents. End ‘feudal’ leasehold. Bring in commonhold. And stop developers’ and solicitors’ ‘unconscionable’ cheating of the naïve
Government to ban leasehold houses and set ground rents ‘as low as’ zero
Government announces ban on new ground rents now, THEN reform leasehold (which is what LKP recommended)
Labour to cap ‘legalised extortion’ of ground rents and end leasehold houses … Opposition and government now compete to reform leasehold
MPs tell government consultation: End leasehold houses. Scrap new ground rents. Ignore pleas for self-regulation. Ban Help To Buy on rip-off leaseholds
Peter Bottomley: Many thanks
I for one am delighted with the contents of the Kings speech, and even more so when it is enacted into Law.
The thorough regulation of managing agents is essential, in my view, to ensure that only fit and proper Companys are the only ones allowed by Law to manage Leaseholder hard earned cash.
Stringent and Legally enforceable regulation is essentially and must be imposed on this industry sector with significant financial penalty’s or strike off for those who consistently fail to meet the basic minimum standard of performance, in my humble opinion.
Anyone who has taken the time to read the background notes from the Law Commission will appreciate that zero ground rents is not an option as the advice of leading counsel is that adequate compensation will need to be paid. The human rights published at the time of the last Bill makes it clear that ground rents could be lowered to nil if compensation provided in the Act was paid.
The Labour Party talk of regulating rather than capping, as capping of rents certainly those indexed linked would have a profound effect on the value – the pension funds that own them will for certain challenge any cap
A more reasonable approach would be to keep the initial rent at whatever it was when the lease was first granted and for any increases to be the lower of what was prescribed in the lease or the RPI whichever is the lower – known as option 6 this would get rid of the pernicious rents and yet avoid a challenge on human rights
The argument the campaigners make to have ground rents zero’s is that ground rent means the developer is making too much from the selling of the flat and this should be reduced – evidence of this overcharging has not been established and the fact it was agreed when the lease was signed with professionals advising makes it a difficult point to argue – the unfair contract terms act cannot be evoked therefore the campaigners hope the govt can step in with legislation to retrospectively alter the terms of sale – Labour worried about compensation claims will probably look at Option 6 – altering contract terms where professionals have advised both parties would not do our worldwide reputation any good
The problem with Stephen is that he sounds so convincing in that he holds the upper hand in his arguments and that they are the only ones to be believed.
He always uses the argument that the Freeholders have rights under the Human Rights Act but we see time after time, freeholders abusing their position. So, apparently the leaseholders have no human rights not to be ripped off? They hoodwinked over 21,000 leasehold properties into doubing ground rents. They know what the law is in these matters and they know how the law operates, yet still they disadvantaged leaseholders, because they didn’t think it would ever get challenged. This openly destroys the argument about the contracts being open and fair with professionals advising as they were unlawful breaches of consumer law or the Housing Act.
So it’s one argument for them and another for everybody else and it’s just not washing!
It’s not washing with the CMA either. They agree these contracts put the leaseholders in a disadvantaged position under consumer regulations. The CMA have looked at the market and found that ground rent is `neither legally nor commercially necessary`. That’s quite compelling evidence to put forward in any challenge from freeholders to government.
The Law commission has stated on many occasions, although they may agree there may be certain duties that freeholders carry out of which there should be a charge for doing those duties, ground rent was not an appropriate vehicle to do so. Hence, they recognised it is for `no service`. Any charges for freeholder services. should be open and attached to the service charge at a reasonable fee.
In fact, contrary to Stephen`s statement, it was suggestedin the event of a legal challenge, The law commission did recognise there was a case for reducing ground went to peppercorn.
When government announced the ground rent consultation, the largest freeholders groups such as the Consensus Group amongst others, at the time thought the game was up on ground rents and they asked government to accept a £250 cap on ground rents and we saw that document in the consultation. So, freeholders were going to concede ground rents should remain but at a max cap of £250. The document is easily viewable online. This would actually free hundreds of thousands of leaseholders from excesses charges or increases in the future on ground rent and ultimately enfranchisement.
So, Stephen, there are plenty of counter arguments to your claims that have a lot of validity and would stand up in court. The freeholders claim that the £250 cap would be in line with the mortgage companies preferences and I think the government favoured this so I’m not 100% sure they would be peppercorn ground rent across-the-board. But certainly you can expect a reduction if not peppercorn.
But time and time again, we’ve seen leaseholders disadvantaged by freeholders when it comes to hidden insurance commissions or rapacious ground rent charges such as the doublers, so clearly they don’t give a f*** for anyone else’s human rights but their own.
The freeholders have very experienced legal teams to draught these contracts and they must’ve known that the modern ground rents are breaching the 1988 Housing Act and causing the assured tenancy trap that could result in people losing their homes from forfeiture and no right to challenge. But no they still went to head and created these contracts.
Stephen, your time is up, you are a dinosaur and time for you to go extinct.
You stated:-
“the Consensus Group amongst others, at the time thought the game was up on ground rents and they asked government to accept a £250 cap on ground rents and we saw that document in the consultation”
What was Consensus Group actually stated in 2018
“Ground rents at the commencement of the lease be set at the higher of £250 or 0.15% of the value of the unit”
Firstly it needs to be appreciated this was written in September 2018 when ground rents could form part of the overall financial package a developer seeks when selling. They proposed that the starting rent when the lease is granted be capped at £250 or if greater 0.15%
Your post written post the Leasehold Reform ( Ground Rent ) Act 2022 which mandated that all new ground rents be a peppercorn . Your post implies that Consensus Group would be amenable to seeing a cap on existing rent being set at £250
You have misunderstood the point Consensus Group
Here is a link to what Consensus Group wrote
https://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/housing-communities-and-local-government-committee/leasehold-reform/written/89781.html
There are about 5,000,000 + Leaseholders who reside in England and Wales who have human rights, so any challenge by a relatively insignificant number of freeholders complaing about their human rights to the courts may prove potentially risky?
The United Kingdoms World standing in terms of financial integrity was greatly diminished following the LIBOR scandal and the Tax Payer Bail Out of the banking sector.
I hope the Government is able to restore the United Kingdoms standing in the Worlds financial markets.
I live in an Extra Care Community in Harrogate. I bought my flat. I moved in 3 years ago. The Service charge then was 730 per month. It is now nearly 1000 per month. Our accounts don’t add up. Our Manager – 1 day per week has sole charge and is incompetent. On behalf of residents , as we now have no Residents Committee, I ask questions but don’t get straightforward answers.
My landlord is Methodist Housing! A charity. They are one of the largest organisations in their field. I love my flat and where it is. I need the Extra care aspect as am disabled. I am 77 years old. Widowed 5 years ago. My state pension is eaten up by the service charge here now. I have 2 small pensions from work before I became disabled 25 years ago.
I’m so sorry to read your story, Ann, but it doesn’t surprise me and my family. After all, institutions like the CoE were lobbying hard to retain maximum freeholder rights from what I understand in a previous newsletter. Religion is a very convenient cover and in my experience it melts away in the face of profits for those at the top.
Does this rather right-wing Labour party have the willpower to truly and swiftly push through reform? For example, where was an update on the cornerstone racket that is marriage value in the speech? So many vested interests and institutionally-held assets by the private, charity and religious-based sectors being propped up by leaseholders and individual buyers. I doubt the King and his his fellow aristos will be sweating over the fate of their seized or gifted estates in cities like London.
My family and I are ordinary (maybe that’s the problem!) Londoners and our freeholder is ruthless in the face of enfranchisement calculations. How nice to be born in the right bed, huh. A lesson for the next life.
Anyway, we hope you get the answers you are rightfully owed about how your service charges are allocated and spent and that you can remain in your lovely flat . And if that fails, get your MP involved (hopefully he or she is one of the good ones!) because from what you say, you’re paying central London levels of service charges. Good luck.
Ann,
What is the name of the property managing agent that manages your home?
The way to proceed is I believe in a series of small steps.
So basically nothing in fact only making commonhold only on new leases will do more harm.
Why buy a old flat where freeholders steal from you in service charges when you can buy a new commonhold flat.
Bill does nothing to address bogus service charges which are many times rent and becoming increasingly unaffordable.
Mine are going up 40% a year for less services (ie cleaners when they bother to turn up only come once a month instead of every week) in a block that isnt being maintained (so no rising costs there).
But I do get too pay for loads of bogus health and safety reports which I’m not allowed to see despite paying for them.
The Government still needs to deal with the long outstanding (12 years!!) Report on Park Home Exit Penalties (known as 10% Commission) where a Home Owner has to pay the Park Owner 10% of their equity EVERY TIME the same home is sold, but for doing nothing!!
Also this is the only form of home ownership where a Park Homeowner has to pay a monthly rental to the Park Owner for their home to occupy it’s pitch, BUT this fee rises EVERY YEAR by CPI, again with the Park Owner doing NOTHING to justify the increase.
Thank you for reporting this and for the many useful insights in the comments. It sounds like great news, but I wonder if anything is going to be done for the oh-so feudal marriage value? To extend or to wait, that is the question…
At Capulet Square despite reducing service charges in 2019 to 140K compared to Trinitys 156K in 2013, and making a mean 20K a year in capital investment to new facility, I still lost control of the RTM company in early 2020 through a fake members vote. This had been preceeded by two years of harrassment, false accusations and bullying by a small group obviously in bed with the freeholders agent. The latter is E&M. Within 5 months of what the other RTM founding director described as a Putsch, E&M had( presuambly at Berekelys behest) put a civil enginerring firm on site to fill up the holes around piping going into each flat above the doors. This is called “Letterboxing” . A 60 to 100 K expense which the freeholder needed to fleece the leaseholders with, despite it being a flaw from the 2 year developer responsible period. They knew I would veto it, That is why they wanted me out. During Covid we tried to rescue it and we had pre-warned Compnaies House that a fake members vote was upcoming in December 2019. Companies House simply registered their resolutions form and HSBC handed over the bank account without so much as a phone call. This Fully illegal takeover shows how an RTM company is completely vulnerable. Courts were closed during the pandemic and refusing to accept my termination (UnderCA 2006 S 312, (from s168) the notice period was not 28 days and i was not given right of attendance) I continued registering and have since registered 3 other directors under the articles 22b. I was trapped offshore and not one of those directors has had the ability or “braves” to re organize a members vote. Trust in other leaseholders is lacking and no one wants to front up the cash for a solcitors incase the vote does not go thier way and they get stuck with the cost. So.. RTM is only part of the answer in the case of large residential estates:-Capulet is 104 flats so not THAT large but still large enough to be politically difficult to manage,Oh yes and I should mention that E&M obvioulsy incentivized a local rental agent who managed 32 flats to sell off , over five years, in order to reduce the polcital power of leaseholder-leaders who had 60 percent of leaseholders on side at the time of the land chamber case in 2013. Five years of management showed that a large proportion of our claims ( unmet by Judge Wilson) were in fact correct , but this did not stop the panel sitting for 2019s service charge case (which I won 24-2) from opining that the travel payments for someone living offshore were Quixotic, and locals needed to manage… purposefully blind (and well outside the jurisdiction of an S27 case) to the fact that the rebellious locals MUST have ahd a self serving reason for rebelling, and were infact those who were in bed with the freeholder and not at all interested in managing according to the lease. And so the estate degrades again and flat values have stagnated. Regarding Liam and St Davids…he needs to get and keep ALL leaseholders on side and get them all to faltly refuse to pay their share of this 600K intercom charge. It is obviously a developer cost posing a maintenace cost and the advise now to ALL leaseholders lookinjg for justice through the land chamber is to bypass this place completely becasue all they are really doing is making Leaseholders pay through the nose for legal support to overcome their egregious verdicts. In my case the service charge case which was brought in 2019 shoud have been claseed as a misuse of judicial process, and thown out . Instead the LC made “the company ” reponsible for its own costs. So my time charge gets paid for by 70 leaseholders who wanted nothing to do with this case. (there were only 12 joint applicants, all supplied by Mr Yau and his two rental agent business partners). So this is the FEAR drving the inability to vote me back in; They all beleive that by so doing I will be able to charge 60 k in case costs to them all. And the land Chmaber could not forsee this? The last hearing of Feb 20th 2020 happened two weeks after the heist of the bank account so they were well aware. In short: “Lease” encourages RTM and Lease conferences supplies a one day HOW TO DO IT course. However all Lease is really doing is setting up naive leaseholders to be hammerd by the Land Chamber whose role in GB society seems to be driven by a political need to assuage/tacitly support the needs of developers, many of whom have offices within spitting distance of WC2. My 2024 is taken up with LIP court action to protect my flat from vexatious charges and get some expenses paid. 2022 and 2023 saw me successfully get one such case struck out and persauding the solcitors general office that their client- the Land Chamber- didnt stand much of a chance at the Queens Bench for a contempt citation ( criminalization) for me recording some of the hearings on my smartphone. I HAD reqeusted a transcript and the LC seemed reticent about it. Recording equipment which looked ot be from the 60s was brought in and so I decided to help them out.. 2 points of verdict were made on the basis of mistaken recording and I used my recordings to appeal. (refused) Thereafter one of my opponents promoted the head Judge to go after me for contempt. The LC live and operate in a moral vaccum. its not just leasehold which needs banning completely, ( for NEW and EXISITING, doing NEW only is going to improperly disadvantage EXISTING on sales ability and sales value) it is the organization which sees itself as the regulator ( which it actually is not chartered to be) which also needs to go.
I think, marriage value should at least be reduced to 50 or 60 years, so many will be tempted to renew it.