The Daily Telegraph ran a powerful article by journalist Emma Lunn on the leasehold houses scandal on Saturday airing the possibility of a nationwide “ground rent strike”.
The notion was aired by Sebastian O’Kelly, LKP trustee, who elaborates here:
“Last week I was contacted by a Taylor Wimpey first-time buyer in Exeter who had bought a £169,000 flat on a 125-year lease with ground rent doubling every 10 years throughout the term and starting at £250.
“That means it reaches £512,000 in the final decade of the lease.
“But more immediately relevant is that soon – say, in 25 years – this flat will need its lease extending. The cost of this will be based on the ground rent multiples.
“It is extremely unlikely that this flat is worth anything like what the young man paid for it.
“He has minimal capital invested in the property and it has very likely gone. Does it make any sense to continue with it at all.
“As I asked in the Telegraph: Can the government stand by and let hundreds of homes be forfeited? It would be an utter outrage.”
LKP estimates that around 65 leasehold properties are forfeited every year. (The Law Commission urged reform of forfeiture years ago; no one – even in this most grasping of sectors – attempts to justify the windfall element of forfeiture. So, why hasn’t government done anything about it?)
Justin Madders, the Labour MP for Ellesmere Port and Neston, raised the issue of the Help To Buy scheme for leasehold properties with onerous ground rents – which are aimed at making the freeholds particularly appetising for investment funds.
“I think government-backed initiatives such as Help To Buy should now make it a condition of purchase that the property is freehold,” said Mr Madders.
“They [housebuilders] have pursued a business strategy that was far from transparent and has left countless people in a less secure position than they thought they would be in.”
The article focussed attention on the conveyancing solicitors, the overwhelming majority of whom were recommended by the housebuilders.
“Controversially, many if the solicitors involved were recommended by the builders, with some purchasers claiming that they were forced to use certain firms. Legal experts say this would amount to a conflict of interest and go against the Consumer Code for Home Builders, which says they “must not restrict the homebuyers’ choice of legal representative”.
“Telegraph Money has seen a reservation document for a Taylor Wimpey home where the buyer was given £4,000 towards legal costs with “Non sol only” (nominated solicitor) clearly written in the terms of sale.”
Taylor Wimpey told the newspaper that it had a panel of solicitors “like most major developers” and that “all solicitors on this panel are completely independent of Taylro Wimpey and there is no obligation to use them”.
Mari Knowles, head of Leasehold Law, suggested that affected home owners get their legal file “reviewed by a specialist and then consider legal action against the conveyance”.
LKP has urged leaseholders to attend talks by Mari Knowles and Louie Burns, an expert in lease extension values and enfranchisement, which have been staged around the country.
Miss Knowles is addressing the All Party Parliamentary Group on leasehold reform on March 22.
LKP has had almost 500 responses to its detailed survey of leasehold buyers with onerous ground rents, the vast majority of whom own leasehold houses.
Its results will be presented to the APPG.
The survey can be filled in here