By Harry Scoffin
Theresa Villiers, the Conservative MP for Chipping Barnet, has laid down a series of technical policy-related parliamentary questions on everything from the meaning of marriage value to the negative impacts of a ground rent ban on “professional” landlords.
The former Northern Ireland secretary even asked whether government has met freehold investors recently to help the policymaking process.
In total Ms Villiers has asked seven parliamentary questions seeking answers that will be very helpful to those who want to scupper leasehold reform.
Leasehold: Reform
The Leasehold Reform (Ground Rent) Bill currently in Parliament will put an end to rents for new residential leasehold properties as part of the most significant changes to property law in a generation. The Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders.
The freeholder-friendly questions are reminiscent of six submitted by Corbynista MP Kate Osamor in 2018 that were covertly crafted by lobbyists Pagefield, then acting in a paid capacity on behalf of the £1.6 billion Long Harbour ground rent fund.
The then shadow international development secretary, inadvertently or not, was advancing the business interests of David Cameron’s aristocratic half-brother-in-law William Waldorf Astor, a protégé of freehold tycoon Vincent Tchenquiz for whom he had worked for six years before Astor established Long Harbour.
There is no evidence to suggest Ms Villiers’ questions were drafted by lobbyists representing freeholders or developers.
Ms Villiers asked whether government had assessed “the effect” of scrapping ground rents for all new leasehold flats “on (a) the involvement of professionals in managing blocks of flats and (b) fire safety”.
Leasehold: Reform
The Leasehold Reform (Ground Rent) Bill currently in Parliament will put an end to rents for new residential leasehold properties as part of the most significant changes to property law in a generation. The Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders.
The linking of ground rents, professional commercial freeholders and the wider fire safety crisis besetting the leasehold sector echoes efforts by lobbyists to scupper plans to phase out the quasi-feudal leasehold system in place of commonhold tenure, which exists almost everywhere outside England and Wales.
PR firm Savanta was last year commissioned by the freehold speculators the Tchenguiz Family Trust, Long Harbour and Wallace Estates to argue that ending ground rents would remove the “long-term stewardship of buildings”, leaving them in the hands of amateur and penny-pinching homeowners amenable to neglecting fire safety and other legal obligations.
Continuing the theme, in a written parliamentary question dated 22 November, Ms Villiers enquired whether Michael Gove, the secretary of state for levelling up, housing and communities, has studied “the potential impact” of the Leasehold Reform (Ground Rent) Bill “on leaseholders’ ability to ensure that building owners take responsibility for (a) building safety and (b) responding effectively to fire safety problems”.
Ground Rent
The Leasehold Reform (Ground Rent) Bill currently in Parliament will put an end to ground rents for new residential properties as part of the most significant changes to property law in a generation. The Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders.
Such a question assumes “building owners” have served as noble custodians of blocks of flats in the post-Grenfell fire safety crisis by paying to fix their dangerously-clad properties.
This idea jars with the reality that the government has had to bailout freeholders to the tune of £5.1 billion because almost all of them declined to pay up and instead went to court to ensure life-changing remediation costs were dumped onto their leasehold tenants.
Ms Villiers also demanded Mr Gove clarify the total cost to freehold owners of the abolition of marriage value – part of the enfranchisement reforms expected next year – and whether landlords will receive compensation for this policy.
It appears Ms Villiers wrongly assumed the policy is enshrined in the Leasehold Reform (Ground Rent) Bill currently going through Parliament.
Although the scrapping of marriage value was announced in January as part “of the biggest reforms to English property law for 40 years, fundamentally making home ownership fairer and more secure”, ministers have never suggested it would enter the statute books at the same time as the heavily-delayed ground rent ban first announced by Sajid Javid, when Communities Secretary, in 2017.
Another question, perhaps to glean further insight into the thinking of civil servants on leasehold reform, Ms Villiers asked for government’s definition of marriage value.
Leasehold: Ground Rent
In January 2021, the Government announced a package of reforms on enfranchisement valuation. This included removing marriage value, which as set out in the Leasehold Reform, Housing and Urban Development Act 1993, is where leaseholders with less than 80 years should pay extra value when the landlord’s and leaseholder’s separate interests are ‘married’ into single ownership.
The move against this arcane legal principle will help all leaseholders seeking to extend their lease or buy out their freehold, especially those approaching the dreaded 80-year mark (at which point mortgage buyers scarper) and lessees who have fallen below it by slashing the costs of enfranchisement.
Housing minister Eddie Hughes’ responded with a strong endorsement and justification of the forthcoming Leasehold Reform (Ground Rent) Bill:
“Leaseholders pay ground rent on top of their property purchase price and service charges, yet there’s no clear service provided in return. The Leasehold Reform (Ground Rent) Bill currently in Parliament will put an end to ground rents for new residential leasehold properties as part of the most significant changes to property law in a generation … lead[ing] to fairer, more transparent homeownership for thousands of future leaseholders.”
According to The Times newspaper, each query registered by MPs and peers for officials to answer costs the taxpayer approximately £140, which means that Ms Villiers’s pro-freeholder written questions will cost an estimated £980.
The Electoral Commission records show that Ms Villiers’ constituency party has received a total of £11,000 in donations from Monte Properties Limited and Lazari Investments Limited since 2015.
In the last three years alone, her local party branch received three corporate donations totalling £6,500, two of which were from property investment vehicles connected to the Lazaris.
The two donors, Monte Properties Limited and Lazari Investments Limited, are companies controlled by a property-developing dynasty once headed by Cypriot-born billionaire freeholder Christos Lazari.
Mr Lazari’s property empire was taken over by his three children after his death in 2015.
Lazari Investments is one of the biggest holders of London real estate, with a value of £3.35 billion, of which approximately 94 per cent is based in the West End and valued at £3.15 billion, roughly the same amount as the entire Grosvenor London estate.
Unlike the Grosvenor Group headed by the Duke of Westminster which spent 400 years acquiring its London estate, Lazari Investments was only founded in 1976, a few years after Mr Lazari came to Britain with just £20 in his pocket.
There is no suggestion that the donations from Lazari-backed companies were linked to Ms Villiers’ decision to file the seven pro-freeholder parliamentary questions.
Related posts:
Few disagreements over banning ground rents, but last minute effort to keep them for retirement properties by Theresa Villiers and Sir Desmond Swayne
Bob Blackman gets Theresa May to commit to ‘peppercorn’ ground rents … Let’s hope she knows what it means
Marie Rimmer MP: how can a modest Taylor Wimpey leasehold house in St Helens pay out £185,850 to freehold investors over 60 years?
Tory MP Eddie Hughes moves private member’s bill to cap existing ground rents at £250
Government told to curb excessive ground rents and ‘disassociate’ from freeholders’ ‘Pledge to Leaseholders’ by Communities Select Committee
LKP accredited managing agent Premier Block Management ‘opens Pandora’s box’ by inviting critical social media reviews
Harry, is this the tip of the iceburge where Lobbyist such as Theresa Villiers MP speaks up for:
Ground Rents,
Freehold Owners and
Marriage value
Are these good investments for those who choose to buy Freehold Develoments?
Our development of 28 flats (groundfloor & firstfloor only) and 1 house was sold in c.2012/13 for £32k a development worth over £2,8 million pounds?
I tried to purchas the Freehold but was informed I wasnt allowed by law as a Leaseholder and also there were 6 other develoments in the same sale.
(We know the developers only pay c.3% of a developments costs and Leaseholders pay the rest.)
It has to be obvious that when MPs raise these questions in the House they are lobbying either for themselves or Companies who benifit from not changing Legislation.
Is this another Cash for Questions?
Why would she want to scupper Leasehold Reform?
The rules of marriage value are completely erroneous.
When the original leaseholder took on the lease he was in effect paying the value of the difference of the price of the property being freehold from what the value would be when purchased as leasehold, ie somewhat cheaper and in theory and similar to a long term loan.
The ground rent being determined on this principle, so that over the full term of the lease the inherited loan would be paid back.
So that when the term of the lease has been completed the freehold should automatically revert to the current leasholder, as the difference has been paid off, and therefore ‘marriage value’ is not a valid argument.
If follows that retrospective compensation and interest should be awarded to those leaseholders who have had to pay for marriage value in the past, the compensation should take into account the time from when the leaseholder paid the marriage value in order that the justified interest would be determined.
Marriage value arises because the figures used for capitalization of ground rent and for the reversion are not low enough. Marriage value has increased in recent years because in my view the deferment rate has not been adjusted
The deferment rate used to value the reversion was set at 5% in the seminal case of Sportelli in 2006 and that rate is made up of a risk-free rate plus an overall risk premium. In 2006 the risk-free rate was 2.25% and the other risk premiums gave a net figure of 2.5% to make the deferment rate on house 4.75% and for flats 5%.
The Governments own calculation ( known as the Ogden Rate) of the risk free rate in 2006 was 2.5% and since then it has crashed to MINUS 0.25% . Therefore, there is a strong argument for the deferment rate of 5% to be lowered.
If the deferment rate was lowered to just 4% ( i.e. just a 1% reduction of the near 3% fall in the risk free rate) you will find that most marriage value disappears.
The government may well abolish marriage value but may well lower the deferment rate to around 3.75% to 4% – therefore making the calculation far easier and quicker for the leaseholder. To date marriage value involves lengthy arguments peering at graphs and talking about a “no act world” etc all helping to create a mystic and complexity about the subject matter
The Great Estates in London would probably accept such a proposal as the premium would be about the same
I am not in any way connected with any legal enterprises so forgive me if this argument seems a bit lame and perhaps this is not the right place to put my opinion but recently I have have been offered the chance to purchase my freehold, however a couple of years ago I applied for and paid the freeholder for permission to make alterations to my house.
If I now purchase the freehold I am in effect also purchasing the rights of the property as well, one of which I have already paid for, ie, the permission to make alterations, would it be possible to recoup the cost of this from the freeholder?
I understand the freeholder had to use services other than his own in granting the permission but when I hear about Marriage Value and these sorts of things it gives the impression that the whole leasehold system is pedantically legal and as far as I am concerned the decision to employ other services was the freeholders decision, not mine.
Thanks. James.
It is very disappointing to read about the MP’s questions on behalf of the landlord lobbyists, especially from the Labour MP .
Having dealt with several hundred sales and purchases of leasehold properties , I have yet to come across any leaseholders who own a share of their freehold who thought “If only our freehold was owned by a ground rent company , how good that would be !”
The effort on behalf of certain “professional” freeholders, designed to cast aspersions on Commonhold and question the ability of leaseholders to manage/commonly own their own premises (under auspices of strictly regulated managing agents) does not surprise those of us long familiar with the unscrupulous methods of this nefarious branch of an unregulated industry.
It is the long history of non-regulation that permitted fraud to become the standard for this sector. And while this particular band of “professional” freeholders remains unregulated, we must expect its adherents to go to all lengths to stay that way.
The last-ditch efforts to derail the Leasehold Reform Bill (Ground Rent) to enable continuation of this modern day branch of Rachmanism do nothing to enhance the “professional;” reputations of certain lobbyists. And I trust that the efforts of Sir Peter Bottomley, Justin Madders, Ed Davey , and LKP et al will now emerge triumphant.
Much as I applaud the legislation to abolish leasehold for new build houses, why is it that current leashold laws are still in place? surely the majority of mp’s are aware of this unjust system …. even our Prime Minister has himself clearly stated that it is unfair!
This being the case its obvious parallell is that of victims of future crime being protected, whereas the crime that is being committed every day is left to carry on…with the legal proffessions blessing !
The British legal system is a complete disgrace when it comes to rational decisions which would undermine the abhorrent income stream of those who have little respect for honest people who actually WORK for a living, rather than have an artificial system which produces NOTHING and has been set up purely for the greed of imbeciles in top hats.
The legal profession does not make the laws. Many lawyers are opposed to the current leasehold system and only a miniscule section of the profession act for the landlords. We need Parliament to enact the necessary reforms.
The legal profession are part and parcel of the leasehold system, some lawyers might put up a front of opposition, but that is all it is, a front. It is in the interests of the legal profession that the leasehold system is maintained. Why in God’s name would the former Master of the Rolls, Sir Terence Etherton, have come out so strongly in favour of leasehold? The entire establishment, in truth, is against significant reform, and most definetely against abolition.
Crispin Blunt MP is the only non-aligned – not associated with LKP – person of note who has expressed things as they are, and how they should be – “Present-day onerous ground rents are, more likely than not, the resultant of UNCONSCIONABLE conduct carried out by one sector of society who have superior information flow (developers, freeholders’ funds, financiers, SOLICITORS) at the expense of an unsuspecting and more naive part of society (consumer homebuyers).”
“He (Crispin Blunt) urges that leasehold houses be transferred to freehold immediately, and that leasehold flats become commonhold.”
“I advocated there should not be any ground rent as property title should be either freehold or commonhold in the future.”
“Titles to people’s home is demonstrative of their ownership to their home that is to serve as a physical shelter and emotional safe haven for the family. Shelter and security is a fundamental need.”
The Law Commission had a remit from government on reform, they willingly (and gladly) went along with this remit – of reform, as opposed to abolition. Our government does not want to abolish leasehold, the legal profession most definitley does not want to abolish leasehold, none of the professions with an interest in leasehold want to see abolition.
Are not solicitors part of the legal proffession…you know the ones who leaseholders were advised by the developer to do the legal work..? without telling the whole story..?
and what about the many problems that have been caused by solicitors not advising their clients about onerous terms in some of these leases.
I know about it because I’m one.
What about the leasehold tribunals which have always favoured the freeholder or their managing company? can anyone tell me of someone in the legal proffession who has stood up to these unscrupulous people? he would certainly be famous and most likely out of a job pretty soon.! NO…! it has taken ordinary people like Mrs Kendrick and LKP to show the system up for what it is.!
What about the cladding scandal, who set up the rules that benefitted freeholders or developers when the worst case scenario occurred! it was lawyers!, they knew that the system was designed in order that the leaseholders would have to pay up, and that the landlord or whatever silly title he has would bear no responsibility whatsoever…!
Don’t tell me its only a few lawyers, don’t tell me its the governments fault because they make the laws, does not the legal proffession have a governing body? what did they do to stop these abuses which by the way are still in operation!
Anyway, I heard the honorable lady Mrs Villiers say that if the leasehold system is scrapped then it will impact pension schemes… but the fact is that leaseholders did not set up the schemes for ground rents and fees for freeholders to be the funding for pension schemes, it has got nothing to do with the leaseholders .. but again if she has her way it will be the same people, ie, leaseholders who will be footing the bill for pension schemes, … if there was any justice in this world it should be those who have been ferreting away ground rents and fees and of course the lawyers who legalised the schemes. who should have their properties forfeited to pay for it all… they must have plenty of money to give back by now.
No I’m sorry Andrew … I am sure you have good intentions but I think I am right in this.
George, I know you are right. The entire legal profession is part of the problem, they – all of them – from the humblest(?) solicitor to0 the highest law lord are complicit.
David ….
Come round to my place and we could both have a bloody good moan about these parasites..!
I am sick to death of the lame excuses freeholders/management companies make for making peoples lives a complete misery… they just don’t seem to have any thought or remorse for what they do, it seems to be that every avenue of escape from these criminally minded morons has been blocked…and we know who is responsible for that!
I am convinced that because they have been on this gravy train for such a long time they think they are entitled to treat leaseholders as lesser beings.
As far as those legal experts who have made sure their clients have absolutely no responsibility for their ‘custodianship’ other than their main concern…collecting the rents and fees…they are a disgrace to humanity! an absolute disgrace! lower than dog…….t!
Instead of doing what people who should be dealing in justice are supposed to do, all they seem to be capable of is providing a legal framework for INJUSTICE !
You know when people are cornered because of unjust laws, and when the promises of change never seem to materialise, there can only be one other way of displaying anger….and I sometimes wonder if governments have deliberately set up this system to see how much people can take before they start taking to streets and use civil disobedience to get their way.