The government now understands something that LKP has been saying for years: leasehold is a deeply flawed system. It is also a critical and growing part of the housing market in England and Wales.
The Housing White Paper entitled “Fixing our broken housing market” launched in February 2017 made this very clear.
This has come as a shock to many providers in the sector. Some had become so complacent after the election, thinking that the govenment had lost interest in reforming leasehold, that they forecast nothing would change. Even in the week before the government consultation was launched on July 25 2017 called “Tackling unfair practices in the leasehold market”, some were still confidently predicting that nothing was going to happen.
As soon as the consultation was launched things changed dramatically, and we’ve seen the sector desperately organising themselves to try to limit potential changes the government may suggest, while at the same time claiming to have put their own house in order.
- Some have started surveys to prove how happy their customers are;
- Some appear to accept the need for some limited change;
- Some “regret” the emotive terminology being used to criticise the sector;
- Some have felt the need to warn government of the danger that investment will fall if they dare to properly regulate the market;
- Some are wheeling out the cynical, self-serving and inaccurate argument that leaseholders can’t be trusted that leasehold is so complex we must only have professional landlords.
In a somewhat unsubtle plea to The Times, September 7, entitled “Ground rent cut ‘means fewer flats’” the CEO of McCarthy and Stone warns bluntly that if ground rents are cut it will mean fewer retirement homes.
Ground rents are essential to McCarthy and Stone’s business model – Better Retirement Housing
Please follow and like us:… but leaseholders are concerned it is selling freeholds to anonymous buyers … McCarthy and Stone complains about ‘right to reply’ to LKP / Better Retirement Housing articles McCarthy and Stone told The Times yesterday that there would be fewer of its form of retirement flats if the government reduces ground …
The developers seem to be arguing among themselves currently. Some accept that they’ve been rumbled: they see that it’s no longer possible to assert that selling houses leasehold is defensible and they realise that the increasingly onerous lease terms some have imposed have damaged the market. Other developers continue to insist that there is nothing wrong, and that you somehow need a leasehold site in order to pay someone to cut the grass.
McCarthy and Stone’s accounts rather give the game away, however. The ACCOUNTS show that ground rent sales are just an additional profit stream. See page 23 of the accounts. It shows “FRI revenue” £27.7 million. This sits within a total operating profit of £95.1 million. McCarthy and Stone explain that the freeholds are sometimes sold on to third parties, even before the bulk of the leaseholders have moved in.
This early sale takes away the 1987 Act option which the pensioners have to buy their own freehold. This is hardly an exemplar of providing customer choice.
At the moment the sector is hurriedly trying to work together in an attempt to design some sort of scheme to self-regulate. Maybe the plan is to agree a set of sector wide lease terms that are “not too onerous” in the hope that the government goes away?
If there were any genuine interest in such a project, the question would have to be: why on earth did the sector not do something in 2005, when these onerous lease terms began to emerge?
The whole sector has known for years how they have made the system work, to their advantage and at the expense of their customers. They were fully aware that they were taking unfair advantage of the imbalance of information and power.
It’s not just the developers who are at fault. The whole supply chain including: the funding companies, the mortgage lenders, the surveyors, the solicitors and the freehold buyers have for years turned a blind eye to the onerous lease terms that now blight thousands of homes. (100,000 homes, according to Nationwide.)
The freehold speculators want to warn government of the damage that could happen to their income streams if the government changes the law. They warn about the impact on pension and investment funds if they’re not allowed to make large profits from their ground rent holdings. Many of these freeholder speculators are based offshore, and even supposedly ethical charities have no problem spending vast sums in the courts defending the income they generate to the detriment of leaseholders.
It should come as no surprise that in the vanguard of the apologists for the leasehold system, we find none other than the chair of the government’s own Leasehold Advisory Service (LEASE). That’s our old friend Roger Southam.
This is a man who seems to miss no opportunity to point to the supposed failings of leaseholders. He does so again in this month’s ‘First Time Buyer’ magazine, telling potential leasehold virgins that leasehold is a nice cosy world with nothing to worry about providing you are happy to be a good neighbour. He somehow omits to mention all of the potential drawbacks of buying leasehold.
It is beyond our comprehension that DCLG remains oblivious to the fact that a man who supposedly follows the Nolan Principles of public service, a man meant to be heading an organisation wholly on the side of the leaseholders, never misses a chance to put the case for the status quo.
Nor does he miss the opportunity to point to the example of leaseholders doing something wrong.
You would have thought that after LEASE had been instructed to take down last month’s Chairman’s statement by Mr Southam that there might have been at least a little circumspection. But no, Mr Southam feels the need to provide a homily about how nice leasehold can be if leaseholders just get on with each other and follow the rules.
He fails to mention that sometimes landlords use those rules to exploit the leaseholders and make their lives a misery.
He fails to mention that first-time buyers need to make absolutely sure that their solicitor tells them the whole truth about the terms of the lease.
He fails to make it clear that it is absolutely essential that a first-time leasehold buyer does not use the developer’s “recommended” or “approved” solicitor or surveyor, but instead chooses their own completely independent experts. Although “free” fees paid by the developer are bound to appeal, the evidence shows that an independent solicitor and surveyor are far more likely to warn of onerous lease terms.
It is little wonder that so many leaseholders now see leasehold as corrupted from start to finish in providing income streams for speculators and their hangers-on.
It seems that the sector has become so used to the idea of plundering every aspect of leasehold, and for so long, that they are in shock that anyone should dare to suggest that this might be wrong.
The government has been desperate to address the housing crisis.
However, there seems to be a strong argument that the ‘Help to Buy’ scheme has done little more than help developers to achieve super–profits while burdening thousands of first-time buyers with onerous and unnecessary leases.
The Sun attacks ‘fatcat’ housebuilders with inflated fortunes thanks to Help To Buy
Rather than claiming to have improved their practices and putting out the PR bluster that nothing is wrong, or that matters could somehow be solved by some spurious code of conduct, the sector should perhaps apologise and explain what it plans to do to help the 100,000 residential homes blighted by onerous lease terms and tens of thousands of retirment homes blighted with poor second hand values.
The fox has been stealing the chickens for many years.
We have had two OFT investigations, a CMA investigation, a Law Commission investigation and decades of resolute inactivity from the taxpayer funded Leasehold Advisory Service.
Each time the providers in the sector have succeeded in assuring the government that they will look after the chickens better in the future, and the government has always believed them.
Apparently, it’s complicated looking after chickens, and anyway it’s always the chickens fault because they don’t understand enough, and they don’t bother to learn.
Maybe, finally, this time around the government will understand that what the chickens need is a proper fence to protect them from the many foxes in the sector.
Roger Southam (chairman of LEASE) apparently runs marathons, climbs mountains, and jumps out of aeroplanes. It is a shame that a parachute is provided for him when he jumps from these aeroplanes.
I know I sound like a stuck record, there is only one proper eventual outcome. There was no need for a consultation, there is no need for debate, leasehold must be abolished and with a retrospective element. All houses must be sold freehold and all apartments sold common hold with only the common holders having an interest in the freehold.
The conspiracy against ordinary property buyers must end. I would like to see those involved in this morally criminal conspiracy(builders, developers, freehold owners, solicitors, surveyors, and other professionals) prosecuted. That is unlikely but surely they can be hit in the pocket as those involved in the PPI fraud were hit..
David, I think that is going a little far to suggest that “It is a shame that a parachute is provided for Roger Southam when he jumps out of a plane”
Of course he should have a parachute!
It is a shame though, that the parachute is not maintained by Firstport!
If the First Port parachute was anything like some of their Lifts then Roger would never reach the ground
David I agree with all you say however it is imperative that the Government introduces Statutory Regulation for Managing Agents and Removes residential forfeiture from the statute book.
It is all very well having shared Freehold/ commonhold flats but if one has eejit directors of the Freehold/ RTM companies who do not want to self manage , unscrupulous Managing Agents step in and we are back to square one.
If Agents are strictly regulated they may think at least once before they nick the monies of innocent leaseholders and if they do should be arrested, charged and treated like the common criminal that they are.
STATUTORY REGULATION FOR MANAGING AGENTS
REMOVE FORFEITURE FROM THE STATUTE BOOK.
I think I might sound like a stuck record too…….
Kim, You have front line experience and, apart from taking away freehold ownership from the crooks, you see it necessary for regulation of managing agents. I have no doubt at all that such regulation is necessary.
David, I am living the dream, oops sorry Nightmare of a Managing Agents utter venality although luckily ( for me) I an no pushover
I am also really rather troubled regarding the relationship between those who chair Tribunals and the Managing Agents who present themselves to Tribunal for a RTM / Receiver Manager gig. ( or however it works),HOW is it possible that some of these Individuals who have a ‘recorded ‘record of Gross mismanagement as long as your arm, can be appointed Receiver Manager by Tribunal? This happens on numerous occasions.
Surely there must be rigorous vetting procedure to ensure that expectant RTM directors are not being given a venal scavenging fox of an agent?
Is the Property Tribunal an old boys / girls club that turns a blind eye to the shocking past conduct of these individuals whom they appoint to the detriment of innocent leaseholders?
You know, protecting their own?
Something stinks. I smell ? Collusion perhaps?
Q. Two Agencies X Z present at Tribunal vying for the same lucrative gig.
Z is awarded the lucrative gig, The Tribunal judge states that both candidates were good but Z got it because Z was cheaper and seemed to have more experience…..
Fast forward 2-3 yrs. Z is now the sole director of the chi chi property and evidence has come to light that Z had been assisting the then owners of the property a full year before being appointed Manager.
Incidentally, the owners of the property that Z worked for are now former owners and did I mention Z is now sole director of a company that bears the property’s address..
Has anything unethical, untoward , or incorrect taken place?
Correction. Z was appointed because Z was ‘Cheaper’ than the other agency and seemed more experienced with that sort of property.
Some leaseholders were most cross at he ruling I believe.
Anyway Z would be more ‘experienced’ with that sort of property cos Z had been working there for a full year beforehand.
Whats going on?
“old boys club”, that is precisely how this world of ours works, old boys clubs and cliques. That is why I do not trust the legal system, nor ombudsmen, nor regulators, not any official body.
I do truly hope you can handle the fix you are in, and that your legal representation knows his stuff.
David, the Q in my previous post was to elicit explanations if any relating to my Q.!
E.G. Was there complicity between a Tribunal official or was it sheer incompetence that such an ‘Agent’ could be appointed receiver Manager etc.
The issue has nothing to do with me or my doings with my naughty , venal but thick as mince Managing Agent?
Also if you had been paying sufficient attention to my posts you would realise that it is NOT me who is “In a fix you hope I can handle” , but it’s the Agent who is a dead agent walking!!!
I do like you but you do come across as a bit of a sexist , patronising wee chappie sometimes!!!
NOW, please give a cogent explanation to my Q.
I do expect the other excellent commenters on this site to participate.
It could be very interesting.
Professor E- where are you?
Kim, My response to your post was an off the shelf courtesy response, it was so because your post was not one of your best – I had extreme difficulty in understanding it. I did get the drift but not enough of the issue to comment..
I remain seriously concerned for anyone who is not one of the boys yet goes to law. Only the outcome of your case will clarify my position, either I am patronising or I am street wise..
Thank you Martin Boyd for this excellent article that clearly outlines the current situation re leasehold scandal And let’s be absolutely clear that this is a scandal on so many fronts. It is crucial therefore that this consultation does not fail and result in a watered down response from the government. The “chickens ” have woken up, found their voice and are transforming into an army of well informed , angry , determined eagles who will not be silenced until the correct and ethical outcome is reached- abolish leasehold ; enforce freehold for houses and commonhold for flats.; and finally compensate those already caught out Leaseholders need not be concerned about the effect of these outcomes upon developers and the housing market no matter what they claim. Developers will still build because that is their business and if they throw their dummy out because their little leasehold scam has been rumbled – so what! They will find other ways to boost profits …..oh wait a minute …..they already have with “fleecehold” , but this time the eagles are one step ahead and are working tirelessly to educate potential buyers on this new scam.
We are on high alert and collecting evidence of these dubious business models – the developers will get tired before we do!
Thank you for such a great article. My freeholder retrospectively applied S172 from the 1985 Housing Act meaning my house is unsellable. It’s apparently all my fault and that of my conveyancing solicitor for not anticipating this action. Flats in the same estate are protected by different legislation and the neighbour across the road was offered his freehold.
There has to be change, the law is a mess, full of anomalies. Will this Government act or does it have to wait until the next election?
In answer to your question “Will we have to wait for another election I say NO.
Leaseholders must rise like lions from slumber, shake off unscrupulous Freeholders chains that bind them, unite and demonstrate to right this obvious wrong.
Despotic Freeholders and their equally despotic puppet Managing Agents cannot be allowed to continue persecuting leaseholders and in turn making their lives utter misery. It is shocking that the gangster tactics used by these Spivs are tolerated in so called civilised society. Many of these gangsters are major donors to all political parties and I am sure sit at the tables of the supposed ‘great and the good’ of all the political parties. I am sure some have been ennobled?
These individuals are no better than the MAFIA and should be shunned by politicians of all persuasions.
Leaseholders will never effect any meaningful change unless they are prepared to fight and fight hard for it.
The Rt Hon Sajid Javid MP and his Gornment must realise that the end is nigh for this feudal system. ENOUGH IS ENOUGH!!
Thought provoking article. Foxes steal chickens to survive, these scoundrels are the worst examples of corporate greed and fat cats. They cannot be trusted to self regulate and this can’t be demonstrated any clearer than by the recent move to advertising properties as freehold, yet further examination of the small print shows that the properties have permission fees just like leasehold houses! They replace ground rent with “service charges” for some token communal area that gets little to service. Taylor Wimpey get lots of PR by setting aside £130m for “tackling onerous ground rents”. Their proposed solution will compensate freeholders, not their customers! We will still be left with toxic leasehold houses, having to pay thousands to buy the freehold via enfranchisement and even then are likely to still have permission fees! The TW scheme is voluntary, if they can’t be honest about how many houses they created with doubling ground rents, how can they be trusted to self regulate? This scandal is about so much more than doubling ground rents, don’t be fooled. The scale of abuse is jaw dropping, by so many in this broken market. It’s time to consign leasehold to the history books where it belongs.
Thank you for such an excellent article LKP. 1000% correct in every way.
It should be published on the front page of every caring newspaper this week and given prime air time on mainstream TV (BBC1 and ITV)
The whole country needs to be made aware about what the government is NOT doing anything about, even though they have been made aware of this situation for an extremely long time.
Trevor Bradley is not exaggerating when he says “The LKP article was 1,000% correct in every way”
Originally, Trevor posted that “The LKP article was 100% correct in every way” but because he or his solicitor were not aware that his posts are on a leasehold basis with a doubling percentage clause for those in agreement with LKP?
Continued! His agreement with LKP has soared to an astonishing 1,000% and is set to increase!
Nice one ME.
I wonder if there is any written law hidden in the government vaults from say Henry the Eighth days which quadruples my government pension every 5 years if I purchased a leasehold with a modern day onerous lease.
Can I use the Freedom of Information Act to find out or should I just ask ARMA or LEASE, you know, those people that are very helpful to leaseholders
Under the terms of the lease after 50 years Henry the Eighth would be Henry The One Hundred and Twenty Eighth!
So the government now understands that leasehold is a deeply flawed system.
Does this mean then that when Sajid Javid ‘ headlines’ the ARMA conference in October he is going to ‘wrap them on the knuckles’ for their appalling behaviour, close them down as an organization OR rather ( as I suspect! ) try to give them some sort of respectability as a PR exercise in how they must improve?!!!!!!
Apologies that should be ‘rap’ not ‘wrap’!!
Let’s organise a demo outside ARMA’s glittering ( snigger) ‘Jolly ‘ in October…. I have a sneaky feeling that The Rt Hon Sajid Javid MP might find an excuse not to ” Headline”.the glamorous ( snigger) event..
Hell, maybe ARMA might even cancel their splendiferous ( double snigger) annual hoolie, because they know they are a busted flush that is about to be junked.
Unfortunately Sajid Javid and DCLG are controlled by major developers like Taylor Wimpey and property lobbyists. In effect they write the housing policies, signed off by the government.
In effect Javid and Alok Sharma ( does anyone know what he thinks, let alone does ) support the views of Mr Southam at LEASE by doing nothing.
Just look at the DCLG survey questions. Nothing about regulation of managing agents, nothing about abolishing leasehold tenure. Nothing radical.
Javid and Sharma are bankers and understand m0netisation of assets such as ground rents not building homes. They should not be in charge of the ‘ Housing Crisis’. They are largely responsible for the housing crisis not the solution !
Considering the banking element I wonder if they were part of the Mortgage Securitisation farce? (SPV).
You think you have a loan with the Lender, only to discover you do not.
Then you discovver the monies have been drawn from an internal fund (SF), which is drawn from a Leasehold Ground Rent fund.
So who actually owns the Property? Answers on a postcard.
The depressing aspect of this caper and all the talk of reform is that we all know in our bones that the English system is too embedded to be abolished. Read the Guardian today about the Duchy of Cornwall. The argument there for not allowing enfranchisement seems to be about heritage. Planning laws would sake care of that problem, surely?
The other depressing aspect is that the vast majority of leaseholders are probably not bothering with the opportunity to submit issues to DCLG consultation. Not round these parts anyway.
Kim of this manor has the key realistic issue, methinks. Get all these so-called industry professional managing agents properly regulated. Commonhold, even where it to be introduced and I am not holding my breath, will most likely still need this shower handling our monies.
Everywhere I trundle on the interweb I see offerings of services to leaseholders:- legal, advisory, you name it. Everybody is SELLING something, seems to me. Leasehold is the golden goose apparently with plenty of gravy to go around.
The idea of leaseholders becoming commonholders free to work together without outside interference or absurd Company Law burdens just to manage their own homes: now that would be something … and even if it were achieved many leaseholders would sit on their hands, sulk, and expect somebody else to do all the work.
There seems a collective ‘mental illness’ and denial among many people who buy leasehold? It’s as if, if they pretend they are homeowners and somebody else is responsible for the bits they don’t own, it will become so.
I’m campaigning for change because it is a generational opportunity. But I bet a jam sandwich of your choice that whatever statute is eventually introduced, the legislators will water it all down, as always before, and what they leave will be as ever shredded by the courts into worthless ‘rights’.
It is a sad and bizarre situation right enough.
Paddy ‘ Kim of this Manor’ cannot disagree with any part of your comment.
It is indeed a “depressing aspect” that many flat leaseholders have not bothered to submit their issues to the DCLG. This is a real opportunity to make leaseholders voices heard.
I have been sending correspondence directly to The Rt Hon Sajid Javid MP requesting that
1. There is strict regulation of Managing Agents.
2. Residential Forfeiture must be removed from the statute book.
3. First Tier Tribunal must be given strict guidelines when appointing Receiver Managers e.g. Vetting procedure.
4. There Is evidence ( out there) that Managing Agents who could not draw a bath, could not organise a Champagne fest in Reims and have been junked by numerous leaseholders after lengthy Tribunal battles, and have had to refund those same leaseholders hundreds of thousand of pounds for overcharging, have nevertheless been subsequently been appointed Receiver Managers at Fist Tier Tribunal..
How does that work?
I have requested an answer from The Rt Hon Sajid Javid MP.
And I expect a reply.
I must confess, had I not experienced the absolute nefariousness of our current Manging Agent I would not have the slightest Interest in all this stuff.
But I have, I am and I will fight to put an end to this feudal corrupt system.
There you go!! ????
In addition to sending correspondence directly to The Rt Hon Sajid Javid MP I have of course completed the online consultation.!!
‘Tis interesting what you find in ye old Hansard…
The Noble Lord Jacobs, who, I believe, sadly died in 2014?:-
[920 ] …”The Government still recognise that the leasehold system is totally unsuited to the society of the 20th century, let alone the 21st century”. Those words were used in a November 1998 consultation paper. Today no country has a leasehold system except Britain. [… ] The leasehold system is designed to give the landlord a second, sometimes a third and even a fourth bite of the cherry. It is a system whereby a tenant can effectively buy his own home. Then he or his successors can buy it again and sometimes again and again.”
Hansard HL Deb 19 November 2001 vol 628 cc907-47
I could not have wished it put more damningly. Perchance why be grubby leasehold still ‘ere then?
Paddy, why not send that 1998 consultation paper to The Rt Hon Sajid Javid MP et al involved in the leasehold reform consultation?
LEASEHOLD MUST BE ABOLISHED.
STATUTORY REGULATION FOR MANAGING AGENTS MUST BE INTRODUCED.
RESIDENTIAL FORFEITURE MUST BE REMOVED FROM THE STATUTE BOOK.
David , in response to your previous post I say ‘” Fair Enough”!
I can see that my question relating to X & Z etc seems a bit convoluted, although I attempted to explain it in the baldest terms.
I know what I believe regarding the appointment of Z but would value the conclusions of others on this site.
C’mon Mr E , Paddy et al- what do you think went on?
Investigatin could actually have repercussions .
I am a bit intrigued by the role our Parliament and the Government have been playing on the leasehold issue over last 20 years; They seem to prefer to focus on symptoms (behaviour of freeholders, developers and gr-rent “investors”) instead of focusing on the causes i-e current legislation and whole leasehold system (tribunals, conveyancers, surveyors, law business/industry); Leasehold cannot be reformed; Leasehold is an ideology; Either you approve of slavery or you dont; People dont want “lightweight” shackles; they want to be free; and we dont need yet another consultation to establish the obvious.