The first speaker at the APPG was Patrick Collinson, Money editor, at the Guardian, who has been campaigning with this story over the past month and half.
Although Mr Collinson kindly acknowledged the activities of LKP, he was first alerted to doubling rents by his 90-year-old father. The latter was advising Mr Collinson’s brother on a house purchase, spotted the doubling ground rent clause and advised walking away.
Mr Collinson read out email correspondence from Guardian readers: one paying ground rent that rose to £8,000 a year; another where they rise to an absurd £8 million a year.
“Arguably this is a case of mis-selling. Were these housebuilders regulated by the Financial Conduct Authority you would have been looking at a requirement to treat your customers fairly.
“Or, this could be seen as an unfair contract term.”
Patrick Collinson could not understand why so many houses in the North West are historically leasehold and housebuilders perpetuate this form of tenure in new build.
“I’m confused why leasehold houses are a tradition of the North West but are unknown in the rest of the country it seems to me bizarre.
“I’ve been a mystery shopper ringing up development companies, and I have been surprised just how bad the information is about leasehold and ground rent conditions
“One salesman was telling me that 999 year lease was ‘virtually freehold’, so when it comes to information about leasehold properties I think buyers are being misled.”
Mr Collinson was also concerned that so many buyers had used solicitors recommended by the housebuilders.
“Housebuilders should be calling a halt to the use of their own conveyancing solicitors. It is evident to me that this is quite a clear conflict of interest and I’m surprised that the Solicitors Regulation Authority has not looked into it.”
Freehold owning companies are far from transparent, the Guardian journalist said.
“It is also wrong that the developers of selling on the freehold to companies such as Adriatic Land (4) Limited where it is very difficult to find out the ultimate beneficial owner of these concerns.”
Patrick Collinson believed major reform was necessary.
“I think we should be looking at reform in leasehold in its entirety. The reforms are relatively simple. We should be looking at new leases having indefinite terms.
“We could simply abolish ground rents. They could reasonably to be termed a socially useless activity.
“After sale, developers should be looking to pass on the management of the blocks to the leaseholders.
“We already have commonhold in the UK, but it is not attractive financially to the developers. After a certain cut-off date, all blocks of flats should have to be built with commonhold tenure.
“Then we would finally be joining the rest of the British Empire – Canada, New Zealand, Australia – which all have forms of commonhold.”
Mr Collinson is now turning his attention to the buyers of freeholds.
“I’ve seen ground rent fund that are among the very best performers of all funds over the past 10 years. This has been hugely lucrative. So, the whole monetization and securitization of this area is something that we need to look into a lot more. In particular, who are the buyers making all this money?”
Its all well and good trying to abolish ground rents, however I completed a lease extension last year and the only way I could afford it was to take an improved ground rent.
Abolishing ground rents will simply make lease extensions more expensive.
I do hope Sir Peter actually has some valuation advice from experienced surveyors and as well as identifying a problem can propose a solution that works.