Time for DCLG Select Committee to call in developers to demand details of the scale of the leasehold rip-offs
Labour MP Helen Hayes is “disappointed” by Communities Secretary Sajid Javid’s response to the leasehold crisis.
Ms Hayes, who is MP for Dulwich and West Norwood, was responding to Mr Javid’s presentation on Wednesday to the DCLG Select Committee, of which she is a member.
She tells a constituent:
“Yesterday we were questioning the CLG Ministers, including the Secretary of State, Sajid Javid.
“The committee asked the Secretary of State about the issue of exploitative leases, and his response was disappointing.
“He indicated that the government’s sole focus at present was on calling a halt to the practice of issuing new exploitative leases, but that the government’s attention has not yet turned to the issue of the thousands of residents who are already tied in to exploitative leases.
“Please rest assured that I will continue to press the government on this issue and to hold them to account for the action that is urgently needed.
“I also met recently with Shadow Housing Minister, John Healey, who assured me of Labour’s commitment to support leaseholders who need a fairer deal.
“I will continue to work on this issue. Please do let me know if there is anything more that I can do to support you either with the campaign or with your individual circumstances.”
LKP urges the DCLG Select Committee to call in the developers and freehold speculators to demand answers to the scale of the leasehold rip-offs.
So far, Taylor Wimpey, Countryside Properties plc, E&J Capital Partners, Adriatic Land and the Ground Rents Income Fund plc (GRIF) have been dreaming up reputation-protecting strategies to resolve systematic shady dealing of their own creation.
Taylor Wimpey, for example, invites ripped off former customers to get in touch and it will re-write doubling ground rent leases with clauses raising ground rent linked to RPI (Retail price Inflation), not the more accepted fair indicator of inflation the Consumer Price Index.
BUT it won’t contact all affected leaseholders; it won’t say how many there are; or where they are. And it won’t offer leasehold house owners the freehold to their houses at the price originally promised by their sales staff – before the freeholds were sold off to anonymous speculators, often based offshore.
It is time Pete Redfern (TW), Ian Sutcliffe (Countryside), Will Astor (Adriatic Land / Long Harbour), James Tuttiett (E&J), and James Agar (GRIF) were summoned for what Sir Peter Bottomley calls the Philip Green treatment in order that we at last get some answers to the leasehold scandal.
Helen Hayes is right to be getting impatient with Sajid Javid, who has had months to deal with this and whose review is now concluded.
Related posts:
Sajid Javid does not like regulation. What about micro management like Help To Buy?
Housebuilders ground rent scandal compo schemes ‘must go further and faster’, says housing minister
Sajid Javid has thought about leasehold property management and does not like what he sees …
Sajid Javid vows to ‘stamp out abuses’ over leasehold that make homes unsellable
Leasehold houses to be banned and future ground rents set to zero, announces Sajid Javid
James Tuttiett: I have lost two buyers of my flat through ground rent scams. Can you hurry up changing my terms?
I predict Parliament will, in the end analysis, do nothing substantial about existing leases and very little about new ones.
To do so would require admitting that the basis of English land tenure is broken at the core. Like unpicking a loose thread, where might it end?
It is one thing to have landowners who pay for their own land and property, and tenants who invest nothing and rent from them, but to create a cynical ‘no man’s land’ of home ownership tenure wrapped up in contradictory legalise is not accidental, nor defensible when out in the open.
The justification as to ‘land obligations’ have long since been addressed by legal minds, yet still the profiteering industry is free (as if acting together?) to submit claims that leasehold is needed for positive covenants, or is the ‘professional’ way to manage communal areas, or that that professional landlords and agents are better at managing property and estates than the leaseholders who live there.
The simple truth is that there are few better ways to generate unearned wealth than to sit on the shoulders of a captive class of misled home ‘owners’. Once captured, they have to collude with the scam or blight their asset. There is no better word in the English language than “freeholder”.
I can see he is an honorable fellow and means what he says, but I do not expect Sajid Javid to manage to change very much at all, given Parliament as we know and love it. Nor for that matter even a reformulated Labour Party if/when it gets the chance again.
Turning to history, Mr Raynsford may have written a book on ending feudalism in the 1990s, but when a government minister he had to be gently reminded that he had promised a Bill on leasehold reform, whereupon he replied: “I have never made a commitment to legislation in the first Session of this Parliament”. HC Deb 10 June 1998 vol 313 cc987-1010 987.
Quote: “Mrs. Lait: It is with great pleasure that I give the Minister the Hansard reference. The quote is from 8 March 1996…” [Official Report, 8 March 1996; Vol. 273, c. 610.]
That period of exciting ‘major’ reform became the 2002 Act. Almost a waste of paper in my view, what with all the caveats and get-outs. Even Right To Manage is a dog’s dinner to operate.
You can’t cash a promise.
There is a huge industry sitting on the shoulders of residential leaseholders. A huge, wealthy and powerful industry.
I bought in the late 90s, knowing little or nothing of leasehold (that is, how corrupt that sector of the property market was). In 2002, entirely known to me, the Commonhold and Leasehold Reform Act (CLRA) was passed.
Subsequently, the freehold was transferred in a way that bypassed our right to buy it. I didn’t really understand the significance of this at the time. None of us did.
Later, after Vincent Tchenguiz bought Peverel in 2007, our service charges started to rise dramatically and the service, already bad, began to deteriorate further. I had no idea when I began to investigate where things would lead, and it’s too long a story for here, but suffice it to say that without the CLRA Peverel (now called FirstPort) would still be our managing agent.
The CLRA may not have been perfect but it worked well in enabling us to get rid of a corrupt and incompetent managing agent. We now have one that is LKP accredited.
The before and after contrast is staggering. Even the “night and day” cliche doesn’t do it justice. Peverel was described to me by an officer of another London residents’ association as “indistinguishable from an organised criminal enterprise” (he had been offered an inducement to withdraw a right to manage claim). Our own experience of it was of an incompetent and unethical organisation, so this was not a surprise, and nor were the revelations about rigged tenders or any of the rest of its vile behaviour.
I remain deeply grateful to Nigel Wilkins and others who campaigned for the reforms that enabled us to end the squalid rip-offs we were subjected to. And now to Martin and Sebastian for carrying on the fight for justice.
We haven’t just replaced Peverel with a competent and ethical managing agent. I have done what I can to help others do this too. It’s the least I can do to repay those who helped us and whose kind efforts I had no knowledge of at the time.
Paul, the CLRA enabled you to do what, who owns the freehold now?
The CLRA enabled us to undertake a right to manage (RTM) enfranchisement. The freeholder is unchanged. It didn’t do anything for us there. As you may know, an RTM claim is simpler and cheaper to organise than a freehold enfranchisement.
The wheels of government move slowly, when they move at all. I wait with bated breath for Sajid Javid’s final pronouncements. Then, it appears, he will turn his attention to those, not only trapped in exploitative leases, but also trapped in unsaleable homes And of course no mention whatsoever of regulation of managing agents.
There is a famous scene in the film on Michelangelo and his painting of the Sistine Chapel ceiling. After a hard day’s graft Mickey would retire to the “Old Bull and Bush” for a few pints with his mates. One particular night the cask bitter was off, despite this the barmaid pulled a pint for the artisan. The landlord rushed over and tasted the beer, then spat it out. He took an axe to the barrel and split it open, the offending beer spilling over the stone floor. “If a barrel is no good, then start again” he uttered as he replaced the barrel. Michelangelo was inspired by this happening, he returned to his months of work – work he was not entirely happy with, and took mallet and axe to it. He started again. There is a message for Sajid Javid, and this government there. Abolish leasehold and start again.
Paddy, why do you wish to create despair, when what campaigners most need and expect is direction, hope, and campaigning?
Sajid Javid has at least stated that he wants no more new leaseholds. With that problem out of the way, campaigners can focus on challenging the builders who created this market, and lobbying Government to enact retrospective legislation as was done with PPI.
I for one would be reasonably confident that with a large united opposition which exists today can create a retrospective change in the end.
Chris, Sajid Javid has said he is addressing exploitative leases, not ending leasehold. Apart from that I agree with your post, we need “Happy, happy, happy talk. If you don’t have a dream, how you gonna have a dream come true”. We need positivity, not negativity and defeatism.
Hi David, I note the words attributed to him were: “He indicated that the government’s sole focus at present was on calling a halt to the practice of issuing new exploitative leases,” So that to me is somewhere between new reduced ground rent ones and none at all. I would hope (that word again!) he would conclude a complete newbuild ban given everywhere else in the world except New Zealand has walked away from them and the English and Welsh public mood is simmering.
For the existing leaseholders, agreed. Abandoned to their fate is a high risk at the moment. My dream is that the campaigners consider going after the builders to go after their reputation, and work the Parliamentary angle in parallel. The builders are busy painting themselves out of the picture and hiding behind the ground rent companies. I personally believe, with supporting evidence, the builders – might be – selling the leases on to the ground rent companies, then have their pension departments re-investing in them via the ground rent companies back door. If this connection can be made, and my evidence is good enough for very focused questions to be asked indeed, then we have a high PR value ‘nicotin kills’ toxic product grade campaign angle to pursue.
Hello Chris, please sign the petition if you have not already done so and share with everyone you know urging them to sign It.
The property industry’s ‘ Weinstein ‘ moment has finally arrived. Leaseholders are no longer cowed or afraid to challenge what is clearly a lucrative scam by Developers , their shady solicitors, puppet surveyors and venal Managing Agents.
I do not believe that Paddy is “creating despair’ – there is a “huge Industry sitting on the shoulders of Leaseholders,” however, as I have said many times much to the chagrin of a fellow commenter- ” We are many- They ( Freeholders) are few.
We must stand together , fight and fight to win.
I used to a pessimist but I couldn’t take the disappointment.
I have a who is something of a catastrophist. We had a reunion of sorts with another friend a while ago and I caused the catastrophist’s wife to snort her drink by saying of her husband that he was a “no glass at all man”. As in, one of us was a glass half-full person, another a glass half-empty man and….
Reminds me of a conversation at a bar with a melancholy old drunk who, when told to look on the bright side, said,
“As a young woman I thought it best not to wish to marry a beautiful man or live happily ever after. My pessimism was only half right. I did marry a beautiful man.”
As the saying goes, be careful what you wish for. This story can be adapted to suit any audience.
I think the problem with the past is this.
A ground rent can only be viewed as onerous when the initial deal was put together
If 2 flats were each worth £300k and one flat was sold for £290 k with a ground rent of £300 per annum and another sold for £40k with a ground rent of £7000 a year linked to the RPI.
The ground rent of £7000 linked to the RPI would on the face of it look onerous. But when looked at in the context of the overall deal can be seen not to be onerous
Therefore, any retrospective curtailing of ground rents will require an analysis of the original deal to see whether the ground rent terms were reflected in the price paid.
I am the only one who has advanced the argument many times that the NPV of the rent should be shown next to the premium paid using a discount rate prescribed by the government. In calculating the stamp duty payable a solicitor acting for the purchaser should in any event need to look at the ground rent terms – and this has not been touched upon
The government should introduce legislation to enable lessees to challenge such ground rent terms at the Tribunal where they can show that the price paid for the lease and the capitalised value of the rent was in excess of the value of the property. I don’t think it can simply be a case of saying any ground rent over a certain figure or incorporating certain terms is automatically onerous it needs to be shown that it was not reflected in the price. In the Taylor Wimpey cases it is easy as there are many sales and compiling the evidence is straight forward.
In my comment on the government proposals I made this point
Here are my comments
https://1drv.ms/f/s!AlBweWAdoygjJJHr3GmQFDPlZ91Ww
Stephen, your link doesn’t work (not for me anyway). I get a 404 error.
“If 2 flats were each worth £300k and one flat was sold for £290k with a ground rent of £300 per annum and another sold for £40k with a ground rent of £7000 a year linked to the RPI.
Assuming you did mean £40K and £7000 GR:-
To compare like for like, we’d have to assume the GR increment periods and terms were the same, so for simplicity I’m assuming a 99 year term with three old-fashioned equal reviews of 33 years (least onerous).
The £300 GR at a 6% yield…
@ 2.5% = PV £6144
@ 3.5% = PV £7095
@ 4.5% =PV £8603.
The £7000 GR at same yield…
@ 2.5% = PV £143,366
@ 3.5% = PV £165,542
@ 4.5% = PV £200,736
So yes, your example would result in flat 1 costing £290K plus £6-8.6K (=£298.6K) and flat 2 costing £40K plus £143-201K (£=241K).
But if this is meant to prove something, I fail to see it?
In the real world, how would anyone know the property was ‘worth’ £300K if sold for less? Let alone if sold for a massive leasehold ‘discount’ to justify a massive ground rent?
Besides, even if feasible to calculate like this, how would anyone afford the onerous ground rent increments if they could only afford £40K in the first place (or any relatively less than top price as is your presumed point)?
These arguments always fail the reality smell test.
There is no empirical evidence produced that I have seen that leases are ever sold at any discount, only for what the market can achieve.
Considering the tortuous absurdity of theological lease valuations as used for lease extensions, there is no way I can see that anyone could determine the true market price, only a theological figure that makes tribunals feel expert in their field. Who is there to challenge them, after all? One court can decide one figure and on appeal the new figure can be vastly different. Two valuers can value the same lease at huge variations. I have seen at least one £100K difference and I haven’t scratched the surface yet.
It is fairly clear that the industry wants to defend high ground rents on a mythology that leases are sold at an equivalent discount.
I say poo.
https://1drv.ms/f/s!AlBweWAdo6ygjJJHr3GmQFDPlZ91Ww
Stephen:
Who is this “we” making a submission, that you publish here? Happy to publish any of the submissions to the consultation, but we do need to know who they are from. Thanks, S
Indeed, who is this “we”? Has the guy who presents himself as an individual without an axe to grind, slipped up? Who exactly is “we”?
Hmmmm interesting. Who on earth could this “We” be? and why hasn’t ‘Stephen”‘ responded to admins very reasonable question?
I recall Paddy stating in a post from the dim and distant past that he thought he knew who ‘ Stephen’ was/Is.
Oh well it’ll all come out in the wash – exclamation mark!!!!!!!!!!!!!!!!!!!!!!!
It does appear that Javid’s prime interest is to avoid bad publicity when he finally announces minor change. He’s good on sound bites like ‘enough is enough’ but he is no action man. I want to be proved wrong.
It speaks volumes that the DCLG can’t even call Builder CEOs to give evidence and still refuses to get involved with Help to Buy lease terms.
Javid is right to be worried by Labour’s gain in crediblity on the Housing crisis. It is a big vote winner for the Party that gets gets it right. His side kick and fellow merchant banker Alok Sharma cocked up on the Grenfell fire disaster and look to be doing the same on leasehold reform.
I fear the shadowy figures at the DCLG will have considerable influence on the latest attempt at Leasehold reform. As they have had over the past 7 years and several Housing Ministers.
How refreshing to see MP Helen Hayes making a stand on our behalf, I thank her and the other MPs who are trying to help us.
We should get some indication of Sajid Javid’s intent when he delivers his speech at the ARMA Conference next Wednesday. I hope there will be some in attendance who will really push him as to his intentions. Unfortunately with it being an ARMA Conference I doubt this is likely to happen.