On the final day of Parliament before the summer recess, the Select Committee which oversees the work of the Ministry of Housing Communities and Local Government launched their investigation into leasehold reform.
Select Committee Chair Clive Betts MP said “With around four million leasehold homes in England, they make up a significant part of the private home ownership sector. We’ve heard however that leaseholders often come up against significant issues which affect their rights, from high service charges with a lack of transparency through to excessive ground rents and barriers to buying freeholds. The Government has said it is committed to various reforms to tackle some of the troubling practices in the sector. As a Committee, we will want to examine the effectiveness of the existing proposals, find out what more needs to be done to boost confidence in the system and ensure fairness for both existing and future leaseholders.”
The committee would like input on three issues:
- The adequacy of the Government’s programme of work on residential leasehold reform, including (a) its application to existing leaseholders in both houses and flats and (b) whether further reforms should be introduced;
- What support and government intervention can be provided to existing leaseholders, in both houses and flats, affected by onerous leasehold terms; and
- What are the implications of providing such support and government intervention to these existing leaseholders.
All submissions must be made by the 7th September 2018
1 Please read the guidance on making submissions HERE
Comments should be sent in via this form
2 Please complete the form for sending in your comments HERE
3 The Select Committee announcement can be read HERE
Things have come a long way since LKP first stood outside the window telling everyone that the leasehold system broken while the sector and officials were telling Ministers that what we already had was “mostly working well” and that they need to “keep the balance between the interests of leaseholders and landlords” .
So much has changed but at the same time so little has changed.
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How true so much has changed but at the same time so little has changed!
I doubt it will change anytime soon for those of us who have replied to numerous ‘inquiries’ before, how much more ‘evidence’ can they possibly need to actually DO SOMETHING?!!!
Ditto. What planet does Clive Betts and his buddies on the select committee inhabit. Many leaseholders I know say what’s the point in replying to calls of evidence because nothing happens in Government.
Why has Clive Betts not invited developer and Housing Association CEOs to appear before his committee. Pathetic bunch of sycophants.
Crispin Blunt (Conservative) MP –
““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).”
“I advocated there should not be any ground rent as property title should be either freehold or commonhold in the future.”
Leasehold and its inter reaction with freehold is akin to a highly complex clockwork mechanism and the tools to correct it will involve insight and careful handling. Not least because their are human rights to be considered when fixing compensation levels
Attempting to fix it with simplistic solutions such as 10 YP fits all and banning of all rents going forward is likely to raise more problems than it solves
Therefore it is totally reasonable and encouraging that those seeking to reform the legislation have requested all the facts to be in front of them from all the parties involved.
Stephen,
I am afraid you are offering the same argument being put forward by many freeholders at the moment. .
There is a counter-argument that peoples humans rights were breached when someone drafted the onerous lease terms and that they are the ones entitled to compensation?.
The suggestion that banning ground rents going forward will produce more problems than it solves is also unsupported by any evidence. However the evidence of the freeholders attempt to disrupt the consumer is longstanding
Stephen, why do other parts of the world manage very well without leasehold, apart from England and Wales ? And what do many freeholders do for their ground rents, very little is the answer ? All properties should be sold as freehold, or commonhold in the case of flats, and leasehold needs to be phased out.
Ground rent is indeed for no service – a review of the lease will show that the landlord is not obligated to use the rent on providing services
It is therefore a burden on the property and is therefore part of the overall consideration when the lease is granted
So long as the rent is clearly disclosed along with its review pattern then it is a matter for the purchasers valuer to advise what level to offer in the property
If the lessees professional advisors fail to consider property the ground terms and advise their client accordingly why should the freeholder be held to blame . Again if the discounted value of the rent was made clear to a lessee on signing the lease many of the problems experienced today would not have arisen
“So long as the rent is clearly disclosed along with its review pattern then it is a matter for the purchasers valuer to advise what level to offer in the property”
Have you ever been on the backfoot of the property ladder?
*Property market. Not ladder. I submitted before reading it.
What you are saying in effect Stephen, is that freeholders can create the terms that they like (however onerous) as long as either a first time buyer or a solicitor recommended (and dependent on) the patronage of the freeholder spots it?
All this in a “Sellers” market where the buyers (especially first time buyers) are desperate to get on to the housing ladder?
With regard to “human rights” and “compensation” I wonder Stephen if you have any figures for compensation for property that has been subject to compulsory purchase actions (for road building or the building of a third runway(in order to better facilitate the departure of the freeholding leeches in this country). What difference in valuations are there between freehold and leasehold homes? Are future income streams taken into account in the valuation?
I am most certainly not saying that.
What I am saying is that any ground rent terms can be set but the value of those terms clearly shown and it’s NPV clearly shown next to the premium so the proposed purchaser can see the terms and make an informed choice either to accept them or reject them.
Where a developer in conjunction with a solicitor seeks to trick a purchaser into accepting onerous terms I think those deals have a criminal intent and be subject to very severe sanctions indeed.
If Ground rent terms are onerous it will be immediately apparent as the NPV of the ground rents being shown right next to the premium on the lease with stamp duty being calculated on the combined figure . Lenders can help by stating that the NPV of the ground rent cannot exceed more than a percentage of the premium
Indeed there may be cases where purchasers may want to pay a higher ground rent in return for a lower premium. If all the terms are valued using prescribed discount rates and clearly shown then abuse cannot germinate
Ground rent is part of the consideration payable and as in the case of loans under the consumer credit act the term need to be shown clearly showing what the true cost is
If portfolios of such rents are purchased by life insurance companies to back long term annuity business as an alternative to buying indexed linked gilts then I see nothing wrong with this PROVIDED the lessees are made fully aware prior to purchase the the ground rent will rise or fall in line with the RPI or CPI . Annuity holder will get better returns from the Life Office it is all part of a circle of capitalism which if there are checks and balances can work for all .
This is why proposals to deal with the abuses on a very small number of cases needs to be handled with care otherwise there will be unexpected consequence which will effect our economy
On addressing onerous ground rent cases I believe the solution is to widen the unfair contract terms act so those cases are not time barred after 6 years and that the FTT should have powers to vary those leases – which should be a cheap and quick way to seek redress for the lessee
A possible definition on the term onerous would be if the ground rent reached a level within the term of the lease greater than a certain percentage of what the property could be let for.
In the calculation there to be an assumption that the rental value of the property grows by a certain percentage based on the long term inflation rate at the time the lease was granted.
The entire calculation would be based on defined verifiable data so that they can be no arguments as to whether a ground rent term is onerous . All reductions in rent to bring the terms into line with a more normal formula would not be subject to any compensation. If a rent is defined as onerous B.B. then the landlord has to vary the lease at his expense
It is an idea for discussion not to act as a lightening conductor to bring down to earth anger and resentment of wrongs committed by some freeholders elsewhere
Stephen, our freeholder also manages our block of 32 flats. Our service charges more than pay for the fabric of the building, and the freeholder makes a bit of profit on that. They would have received a decent amount when the flats were developed and sold 20 years ago, they should not be able to keep going back to the well through lease extensions, and when they do nothing for the ground rents. We have looked at RTM, it is a tedious, protracted process which encourages the freeholder to remain in situ, especially when a large minority of leaseholders are absent landlords, or take little interest in their building.
Hi Stephen. Might have missed this…
Are you now or have you ever been a residential leaseholder?
Is any of your kin leaseholders?
If you merely know leasehold and its effects from your bank balance or a spreadsheet, why not take that familiar broken record theoretical commentary somewhere where it might convince the uninformed?
Wasting your time here, methinks.