By Martin Boyd
LKP first engaged with the Church of England in a case some years ago where the church had sold a plot of leasehold land to allow a house to be built.
The church surveyors returned after the house was complete to demand further payment for the easements needed to install the utilities. They also proposed a service charge for using the road, based on the fact the new house was at the far end of the road and should therefore pay more than either the local hall or the church itself.
The investment function of the church took a very robust approach and it took months before, with the help of the church’s representative in Parliament, they were persuaded to take a slightly more moderate approach.
The Church Commissioners now join hands with large commercial landlords like the Cadogan and Grosvenor Estates to protect their assets at a national level. Their submissions to Parliament benefit from the input of the very expensive lawyers who have been quietly trying to undermine the Leasehold and Freehold Reform Bill from the start.
The church appears to welcome few – if any – of the reforms proposed by the government in the Bill if it impacts their land.
Instead of expressing some awareness of the plight of leaseholders trapped and ruined in the building safety crisis – or pensioners or first-time buyers or shared-owners – it makes a joint submission to the Bill committee with a number of largest commercial landlords along with some of the other supposedly ethical charities.
They all forecast major problems if their incomes are impacted:
https://bills.parliament.uk/publications/53831/documents/4325
Not only do they argue to keep marriage value they also want to keep their legal fees and they want to stop the expansion of leaseholder control. They offer bleak forecasts concerning the dangers that these changes may mean for leaseholders themselves, who may not be able to remortgage and that sites will become run down.
The Bishop of Manchester has been the church’s main speaker in the Lords repeating much of the sector’s long standing cant about the landlord’s custodial role and the importance of preserving their income streams. The landlords claim to have expert research that shows there will be little benefit to the consumer, that those who benefit most will be those living in expensive homes and that it will be harder to build going forward. The bishop claims that he is not arguing for ground rents but ground rents create the value that produces the enfranchisement valuations he wants to keep.
The church then wrote separately complaining about section 34 and how it might limit their ability to recover costs from leaseholders. s34 which has now become s62 is seen as complex because it’s the key clause that shifts the landlord cost recovery rights but there is nothing in the Bill to stop a landlord recovering costs: he simply has to get the tribunal to agree that it’s reasonable.
https://bills.parliament.uk/publications/53908/documents/4350
It is unclear why the church feels it should keep its present – unfair and unbalanced – automatic right to legal costs, even if it gets things wrong. Or why it opposes so strongly the notion that both parties pay their own costs, or one where if the leaseholders do actually win a case why they might just possibly be entitled to their costs.
The leasehold system has the hardest effect on those who are the most vulnerable, be they the old or the first-time buyer. It is unfortunate that the church chooses to seek to maximise its incomes from these people and to align itself with the powerful and wealthy commercial landlords who have profited from other peoples homes over hundreds of years.
The Church and the large landlord claim their human rights are breached while at the same time being uninterested in the rights of people living in these flats.
The government appreciated at the outset of this Bill the issue of landlords’ human rights, and did not see the Church’s rights were being breached.
In the House of Lords the debate has been robust and Lord Truscott has openly criticised the church:
“I refer to the proposal in the name of the right reverend Prelate the Bishop of Manchester, who was refreshingly frank at Second Reading. He said that the system could be described as “feudal” and that some of the Church property he dealt with dated back to the 11th century. The property portfolio of the Church of England is valued at £2 billion—it is a business. It has assets of at least £6.7 billion. As we all know, the Church of England does a lot of work with charities and works with the poor, but some have already questioned whether its 105,000 acres of land could be better used, in part, to provide the social housing so badly needed by the needy and homeless.
“With the great estates, the story is also about retaining their wealth, not about losing it. I have no problem with that, I just do not think that it should be at the expense of leaseholders. They need to move with the times; the old ways of fleecing leaseholders are increasingly untenable.”
In all the years of consideration of leasehold reform the church has never felt it relevant to speak at the meetings of the All-Party Parliamentary Group on leasehold and freehold reform. Perhaps the Bishop of Manchester could speak at the next meeting.
Related posts:
Leasehold injustices on BBC’s Victoria Derbyshire show
APPG leasehold chairs call on Lords to support McPartland-Smith amendment tomorrow
Leasehold law – the first real changes in 14 years?
Baroness Gardner raises issue of leasehold tribunal legal costs in Lords …
Blatant pro-landlord loophole left in the Ground Rent Bill. Is this the way leasehold ‘reforms’ will go?
Government seeks £20.5 million off John Christodoulou for Canary Riverside building safety works, reports FT
Prior to 1967 for houses and 1993 for flats, the leasehold had no right to extend the lease, Therefore flats sold for less and the freeholder received less. With the passing of the Acts in 1967 & 1993 leasehold became more attractive as of course there was the right to extend and price rose. Therefore, a profit was created and in order to make that profit there had to be a leasehold interest and of course a freehold interest. In the case of Flats in 1993 the agreed compensation was split 50:50 and has been the case for some 30 years now.
Therefore, buyers of short lease flats bought knowing what the formula was and reflected it in the price paid . Short lease properties are generally not easily mortgageable and consequently tend to be bought by wealthier buyers or investors . If marriage value is no longer part of the price of extending a lease, then an unexpected windfall falls on those who bought short leases . It also means that the agreed compensation agreed 30 years ago changes and that seems profoundly unjust. The government can change policy if it is felt that it is in the public interest, but to pass wealth from one group of wealthy investors to another group of wealthy owners/investors does not seem meritorious of such intervention and amounts to a confiscation of property rights, not something that would help the United Kingdoms reputation on the world stage
Hi Stephen,
I don’t follow the explanation of marriage value, to my mind the Leaseholders 1993 right to extend the lease is, crucially, subject to them paying the freeholder the deferred value, at the market rate. It’s like saying you have a “right” to buy apples, at whatever the prevailing price of apples is; there is no “value” in gaining the right to buy something at the market price. Imagine there is a lease with 1 day remaining, if I want to exercise my right to extend, I need to pay the deferment value equal to the full value of the flat, less the value of the flat in 90 (or soon to be 990) years. That’s equivalent to just buying a new leasehold, so where/what is the ‘marriage value’? Could you explain? genuine question
In a block of flats that self-manage there is always the risk that a bully/chancer buys one of the flats. Recognizing that there is a group of well-meaning individuals who may well have difficulties grappling with the law, will play games by withholding service charges for all manner of reasons.
The residents would be concerned and worried about incurring legal costs and fear that any shortfall in the legal costs would have to be bourne personally by the directors as the shortfall cannot be passed through the service charges
The consequence will be that they pass it on to a outside manager whose fees will have to reflect the risks in litigation, or the directors will have to be paid fees with PAYE etc to recognize the risks they are taking on.
Perhaps a default position that legal costs are recoverable unless shown to be unreasonable should apply to RMC companies and RTM companies, recognising that such costs will be greater as their clients ( ie the RMC or RTM companies) do not have specialist knowledge in managing properties
Stephen
What is your view when the current Law allows or permits any incompetent “fly by night management agent” to take reponsibility for managing an apartmentment block and invoice Leaseholders for goods and services that are not delivered ? Please remind me what is that called in the real world!!
This Industry sector is :largely unregulated: despite manifesto pledges.
Do you believe that this feudal archaic form of tenure is justified and why and for who’s benefit?
I believe in upholding contract law, so that if you enter into a contract to pay a rent and that is disclosed to you at the time of sale, and you have a solicitor act for you along with a valuer and mortgage broker, that rent ( unless crouched in terms to entrap the leaseholder) should stand. If it is to be changed to help in deliver an important change then the level of compensation should be around Market Value. In this Bill the intention is to primarily help leaseholders take control of their building, and that can be achieved equally by exercising an RTM. Because there is this simpler, quicker and cheaper way to do it then the justification for interfering with the f/holder’s rights is difficult to defend and compensation should be market value
Estate and service charges are best discharged with those who have a proprietor interest in the subject, and should be default be left to the l/holders. But if they are unwilling, disinterested or run into difficulties then it has to be handed back to the F/holder. If that freehold interest has no value, then there will be nobody to pick up the reins other than say a manager appointed by the FTT
The idea that commonhold will solve all problems, I think is unlikely. People will bicker and squabble with one another over shared drives boundary fences noise etc etc and these same issues will arise in commonhold. Commonhold bocks will in some cases appoint a managing agent and the same problems as before can arise
By naming the dissenters as “The Church” are we referring to just The Church of England or does it include other denominations or variations.
It may not be fair to discredit them all for this reaction
Michael,
My reading of Mr O’Kellys excellent article leads me to believe that he was refering to the C of E Bishop of Manchester.
No doubt other corporate entity’s of “God” have similar demands and wish to maintain the “as is” in a agreed effort to maintain the “Status quo:”
After all money talks, especially money derived from others which naturally includes the vulnerable and elderly Citizens of this United Kingdom.
I apologise to Mr Boyd for writing that the author of the above news article was Mr O’Kelly, when in fact it was Mr Boyd.
Question. How can a corporate entity claim to have Human rights?
I am under the impression that human rights are for people?
Because if a corporate entity had no human rights the state could take their assets without compensation and they would have no right to challenge such outrageous behaviour. As a consequence, the shareholder gets no compensation
Stephen,
Thank you for your reply. Ultimately the Supreme Court will eventually rule and deliver a judgement on the human rights of Freeholders versus Leaseholders.
Am I right in believing that Leaseholders will have to stump up the cash to pay the Freeholders Legal fees in any Legal challenge involving an case put before the Courts?
My question my seem bizarre or irrational from a contributor who lives in the 21st Century, Many Leaseholders have had enough of being systematically exploitated on a alleged industrial scale by those less than honourable.
Provided Freeholders are serious about putting this industry’s obvious failures right the United Kingdoms broken housing market will continue.
I believe that serious reform will result in the builders providing more affordable homes which will increase turnover and profit, and mean a win win. The associated benefits may well stimulate economic growth and prosperity to all those whos lively hoods are relient on the housing market for their business and income.
The freeholders legal costs are incurred not to peruse monies owed under a lease and therefore cannot be recovered from l/holders
Being able to change contractual terms notwithstanding that the ground rent is for no service and disclosed to the purchaser before the signed up – does open the floodgates to all sorts of contracts to be revisited – especially those where the purchaser of the goods or service were not legally represented at the time
Leasehold homes are distinctive to England and Wales. In these countries, nearly all flats and some houses are purchased and sold by leaseholders who do not own the property outright. Why should England and Wales be the only two countries in the world subjected to this outdated form of leasehold servitude, which in some instances, amounts to exploitation on an almost industrial scale?
I believe that this or the next Government should take the decision to consign this medieval form of tenure to history’s dust bin and follow the example’s of Scotland or Australia.
What do you expect of a Protestant?
The Church of England has already had to acknowledge the extent to which it profited from the slave trade.
Before opposing leasehold reforms The Church of England should acknowledged how much of that profit was used to purchase the huge amounts of freehold that they now own and profit from by way of income from leaseholders.
Edward,
I was shocked to learn that Slave owners received Tax Payer funded compensation when when Slavery was out lawed!
I wonder if this had anything to do with contract Law or Slave owners human rights?
This scenario may play out again in the Courts. The outcome may require the Leaseholder to compensate the Freeholder either directly or through a Tax Payer funded compensation package?
The question was “Why is the church blind to the injustices of leasehold?” Without going around the house(s) – of parliament, it is quite simple really. Religion as presented by the churches is the oldest ruse in all of history. It was the churches who invented the protection racket for instance, criminal organisations like the Mafia merely copied this practise from the churches. Martin Boyd is a worldly individual, I am surprised he saw fit to pose the question
Just watched the Lords debate the bill on wash-up and the Commons’ approving the final amendments. We have an Act!
Talk about a rear guard action by some m’Noble Lords!
No idea yet what the surviving details are myself. Will be coming here to find out.
LKP got a very deserving mention. Congratulations on progress so far. More to do.