MP attacks ‘charity’ residential freehold owners gaming the leasehold system and cites the Mary Magdalene and Holy Jesus Trust

Yesterday MP Chi Onwurah launched a devastating attack on charity owners of residential freeholds, taking up the issue of the Mary Magdalene and Holy Jesus Trust in Newcastle.

She spoke out in the Commons to

“expose a situation that combines all the worst parts of Dickensian legal tragedies, Kafkaesque bureaucracy and Catch-22 conundrums with charitable oppression thrown in”.

Although Ms Onwurah, Labour MP for Newcasle upon Tyne Central, addressed the Mary Magdalene and Holy Jesus Trust, the points she made could just as easily apply to any leasehold house owner of the National Trust or the assorted charities associated with residential freehold investments such as Wellcome Trust, or the Freshwater or Moskovitz families, who have incorporated freeholds in charitable entities.

Why are National Trust leaseholders in uproar over ‘modern ground rents’?

St Mary Magdalene and Holy Jesus Trust: Leasehold

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Ms Onwurah addressed the cases of Howard Philips and Phyll Buchanan, who purchased their separate leasehold houses on the open market in 1998 and 2004.

Mr Phillip’s has only 70 years left on the lease and Mrs Buchanan’s 60 years, so no buyer would obtain a mortgage. Under the 1967 Act, charities are excluded from selling the freehold through enfranchisement and have discretion whether or not to extend the lease.

In this case, the Mary Magdalene and Holy Jesus Trust, which receives minimal donations and relies upon its investments to provide housing for older people, declines to do so.

The Mary Magdalene and Holy Jesus Trust has assets of £44 million, the Commons was told, and was established for the benefit of “the freemen of Newcastle upon Tyne and their wives and children”.

“[It] is now a considerable property owner in Newcastle,” said Ms Onwurah. “It owns the freehold of the St Thomas area of Newcastle as well as numerous properties in this and other areas of the city.

“There is also an intermediate lessee and managing agent—Home Group, a housing association [also a charity].

“In refusing to extend the leasehold, the trust is causing misery for leaseholders and forcing many into financial distress.”

Howard Philips is in his late 70s and wish to downsize.

They told Ms Onwurah: “The house is not suitable for our old age. The cost of maintaining these Victorian Grade II listed houses is substantial and will be a burden for the remaining years on the lease. We cannot easily manage the six flights of stairs or afford to maintain the property.”

She gave the example of Michael Armstrong, who says:

“We are a low income family with three children and had planned to pay off our mortgage by selling the house and downsizing once our children had grown up and left the family home …

“Due to the fact that we cannot extend our leasehold, or buy the freehold … we are basically trapped in a very worrying and insecure situation and face the real possibility of losing our family home.”

Another is Sasa Savic, who told Ms Onwurah:

“When I arrived in the United Kingdom as a refugee having lost everything during the war in the former Yugoslavia, I would have never imagined that I would be facing yet another battle to save my home.”

Another is Denise Cook, who bought a house where the freehold is owned by the Mary Magdalene and Holy Jesus Trust for her elderly mother to live in.

She told Ms Onwurah:

“My mum spent thousands on this property … And to find now we can’t extend or buy the lease has been extremely upsetting for us.

“We now find ourselves having to still pay the mortgage and associated costs for the next 60 years, we are now 60 my husband and myself and our own mortgage is coming to an end. We have no idea what the future will hold and it is of great concern we pass this debt on to our family.”

Under this Government social housing tenants have a right to buy after only two years, but my constituents are not even allowed to extend their leasehold. The Minister has said that we need to help more people to achieve their dream of home ownership, so how can it be acceptable that my constituents stand to lose their homes because of this legal anomaly? As Mr Philips says:

“Every day we have to face this nightmare and it is taking a toll on our health.”

Ms Onwurah said the Mary Magdalene and Holy Jesus Trust was “sympathetic to the residents” and acknowledges that this is a “horrible position to be in.”

“But it claims that it ‘cannot change it as things presently stand.’ This is because it has received legal advice informing it that it is under no obligation to sell or extend the lease, and fears repercussions from the Charity Commission if it does so.

“It pointed out to me that it has ‘a duty to existing and future beneficiaries and to preserve the assets of the charity’.

Ms Onwurah declined to pass judgement on the charitable activities of the Mary Magdalene and Holy Jesus Trust beyond stating that:

“I therefore do not think they [the freemen of the city of Newcastle, and their children, wives, widows and associates] can be considered to be the most needy people in Newcastle.”

[The accounts acknowledge: “21  Related party transactions: A number of Trustees have relatives  or members of their Freemen Companies receiving sheltered housing provided by the Charity. All of these beneficiaries qualify  for housing under the charity eligibility criteria. All transactions with these related parties were at arms length.”]

Addressing the housing minister, Ms Onwurah said: “Will the Minister also join me in imploring the Charity Commission to make it clear that while charities must act in the interests of their beneficiaries, that should not be at the cost of making life a misery for others?

“Charities must be good citizens of the communities they are part of and on whose generosity they depend. That is certainly not the case here. Will the Minister also urge the Mary Magdalene and Holy Jesus Trust charity to be charitable in its actions as well as its words?

“As a good socialist, I find it ironic that I am advocating for property rights that this Conservative Government are denying.

“Some might argue that the houses should never have been sold to their tenants, given the complexities of the charitable leasehold system and the need for social housing in Newcastle and elsewhere, and some might think they had a point.”

Housing minister Alok Sharma replied that he would ask “my officials to be in direct contact with the trust to see what help can be provided to leaseholders with regard to their desire to exercise their right to buy in terms of the freehold. We will cover what flexibilities there may be for the trust to apply existing legislation to help to resolve some of the issues raised … ”

He added:

“Returning to the wider recent consultation, we will look at the responses and also consider issues on the disposal of charitable leasehold homes. This will need to show fairness to the needs both of the freeholder and the leaseholder, and also strike a balance with the needs of charities to remain on a sustainable footing to continue their good work.”

Financials of the Mary Magdalene and Holy Jesus Trust:

Charity Details

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