Louie Burns, the MD of Leasehold Solutions, has questioned whether the Law Commission’s examination of lease extension and enfranchisement will bring about the “seismic changes” that are needed.
Mr Burns has criticised the “vague platitudes” of the Law Commission, which set out its terms of reference at the end of last week for its Residential Law Reform project. The final report expected in 2019.
Law Commission sets out how it hopes to create a better deal for leaseholders – and look at alternatives
Mr Burns also feared that home owners may mistakenly let the time left on their leases run down while they wait for legislation.
He said: “We welcome any announcement that promises to bring about meaningful reform of the leasehold system, but we are concerned that the scope of the Law Commission’s review is based on vague platitudes such as ‘will consider’, ‘will seek to’ and ‘will review’.
“Ultimately there is no guarantee that the reforms will deliver the seismic changes needed to bring meaningful improvements to the leasehold system, nor that the Government will actually implement the Commission’s recommendations when they are published.
“We also worry that many leaseholders will now not take action to remedy the issues created by their falling leases, while they await fresh legislation from Government. In reality it will be several years before the Law Commission’s report is published, and even longer until the Government is in a position to propose legislation to tackle the many problems with the leasehold system.”
LKP is contacted regularly by leaseholders seeking advice on whether to extend their leases now, or wait for legislative reform.
If the leases are comfortably above 82 years, leaseholders can afford to see what emerges from government.
But those whose homes are evaporating in value with short leases probably should extend anyway to stop further erosion of wealth.
Leasehold reform campaigners slam ‘vague platitudes’ in Law Commission review of the sector
Leasehold reform campaigners have expressed concern that home owners could mistakenly delay extending or buying their freehold while they wait for the Law Commission to review the sector.
As Louis Burns says “seismic changes“ would require the legislators to throw away all the established principals of valuation which have been arrived at over some several thousands of decided cases.
Mindful of the pledge to make it cheaper it may be that for many properties prescribed rates for capitalisation of rents and deferment rates for valuing the reversion along with prescribed percentages for relativity could be introduced. If the value of a flat/house could be calculated from say its council tax banding then the whole exercise would not require valuers. With standard templates for extending the lease at the land registry the whole exercise could avoid even legal fees
There will of course be exceptions such as very short leases and high council tax banded properties but the vast majority could be dealt with quite easily .
Collective enfranchisement in flats would still be challenging but extending a flats lease is relatively easy to solve on the lines I have outlined
Remember for a lessee seeking a statutory lease extension the lessee could easily face some £2000 from the landlords legal and valuation experts. In addition the lessees own legal and valuation fees for taking part in this ritual dance could easily be the same .
Therefore very eaily indeed some £4000 would be incurred on professional fees
It is here where the government could deliver the savings to lessees it has promised
What Louis Burns said was, ““Ultimately there is no guarantee that the reforms will deliver the seismic changes NEEDED to bring meaningful improvements to the leasehold system”.
Stephen, you wilfully misrepresent Louis Burn’s position, but you would, wouldn’t you.
I can see your point, I should have said
For the seismic changes referred to by Louis Burns this would require in my opinion legislators to throw away all the established principals of valuation which have been arrived at over some several thousands of decided cases.
There are so many confused people out there now. They are only just realising that they have been caught up in the leasehold scandal, they don’t understand the language used in the sector and they are confused and frightened. They don’t know who to believe and are likely to panic into informal lease extensions and enfranchisement. We need big, controversial changes to prevent Leasehold abuse and it needs to happen quickly. This is impacting thousands of people’s health and well-being on a daily basis.
Me sits on a 65 year lease. Only one neighbour bought an informal +90 years. I saw the variation deed. The GR was only increased once and just for the whole +90 years. The cost was about 15% of their purchase price for the short lease excluding fees, and they sold the extended lease for 25% less than their purchase price for the short lease.
Meanwhile two identical flats with unextended leases sold a year later for 10% more than the price achieved by the neighbour who had extended by +90 years.
Me, I have no idea what to do. It is all an expensive farce.
I cannot comprehend why such government change should take so long, especially as there is substantial cross party support, leaseholders have already endured numerous delays PLUS JAMES WYATT (top London Surveyor who has extensive experience with years of research completed and is supported by professors at Cambridge university into lease extensions and also highlighted the injustice of the hughely biased lease extension calculations currently used in the MUNDY case)…WHY DOES THE GOVERNMENT NOT WORK WITH JAMES WYATT AND HIS EXISTING WORK/RESEARCH TO SPEED MATTERS UP. I genuinely feel that the government is simply providing LIP service….and perhaps have ulterior motives for ongoing & unnecessary delays!!
“working with the Law Commission to support existing leaseholders – including making buying a freehold or extending a lease easier, faster, fairer, and cheaper;…
“…This is a highly complex area covering hundreds of pages of legislation and multiple Acts of Parliament. This is why we will work closely with the Law Commission as part of their 13th Programme of Law Reform. We will prioritise making the process of buying a freehold easier, to support existing leasehold house owners, and will seek to bring forward solutions by Summer recess 2018. This will be followed by bringing forward new legislation when Parliamentary time allows.”
Leasehold and commonhold reform: Written statement-HCWS384, made by Sajid Javid MP, (Secretary of State for Communities and Local Government).
In a very recent interview on Andrew Marr, Sajid Javid stated (on a separate topic) that because the Government enjoyed All Party support, he envisaged he would have no difficulty in bringing forward early legislation.
And he is making the same statement here, with the Law Commission cooperating in prioritising as urgent the twin issues of enfranchisement and lease extension.
Following the Summer recess we can look forward to Justin Madders MP introducing his bill. and with All Party support, expect the DCLG to bring forward early legislation. Thereafter,, the more complex areas can be worked out continuing into 2019..
This must be our first priority.
The cost of the freehold for Leasehold houses does not include marriage value and when the term is quite long then unless the value of the flat is very large it becomes simply a capitalisation of the rent . Therefore with prescribed discount rates applying to properties upto certain council tax banding on very long leasehold it should be possible to make the valuation a great deal easer and avoid having to instruct valuers – something achievable this year
Hello Stephen, there is already a solution to the cost of freehold. The formula in the Leasehold Reform Bill by Justin Madders MP at 10 times ground rent.
When the base rate is 0.5% how do you justify capitalising a ground rent at 10%
Further the proposals fails to deal with the reversion
So a lease of 29 years at a £1 per annum on a flat worth say £250k could be extended for a tenner . This would hardly meet the requirement to make lease extensions fairer. It would hand the lessee who may have bought it a few years earlier with a huge windfall and the previous lessee who may have sold the flat for a fraction of its value gets no redress at all
Stephen, all of us here on LKP do appreciate that you have been tasked by your employer (is it one of the Tchenguiz brothers?) to defend this obscene thing called leasehold. It is a thankless task, but you have stuck to it manfully.. Many of us admire the intellectual contortions you have performed, the slights of hand, the jargon and esoteric wizardry, all to defend the interests of your employer – well done that man, I say.
But you have been trumped, roasted on a spit and then spat out by none other than a true blue Tory, step forward the honourable member for Reigate, Crispin Blunt 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).”
“Government can support existing leaseholders with onerous ground rents by passing legislation to unwind and nullify those payment obligations.”
Crispin Blunt says so much more, all of it overwhelmingly against our leasehold laws and castigating those who feed of them.
“I advocated there should not be any ground rent as property title should be either freehold or commonhold in the future”..
Mr Crispin Blunt’s remarks refer to onerous ground rents which represent a minute fraction of the market
if the law commission believe it will take some 2 to 3 years to consider proposals to make the processs easier quicker and fairer for lessees it highly unlikely that the embodiment of all their deliberations will result in 10 times the rent being the answer
What Mr Madders will achieve is make the government get on with the process and hopefully bring about changes in this parliament whereby for leasehold houses the process for enfranchisement is made simpler by the introduction of prescribed capitalisation and deferment rates. Further simplyfing the process whereby historic rateable values determine the approach used are made easier
Compensation to the receiver of the rent has to be fair compensation and 10 tines the rent clearly fails to achieve that
As manful as ever, you are diligent in your duties to your employer. I think a bonus is in order.
“I advocated there should not be any ground rent as property title should be either freehold or commonhold in the future”.
.”He urges that leasehold houses be transferred to freehold immediately, and that leasehold flats become commonhold”.
Crispin Blunt could not be clearer, he addresses both existing leasehold situations and a future without leasehold. Not only does Mr Blunt support abolition, he suggests a remedy for existing leaseholders. And even implies that remedy should be without cost to existing leaseholders.
This much is positive for you, Stephen, The Law Commission, guess what, is composed of lawyers, and is very much for the status quo. The Law Commission can be considered to be alongside all of the leasehold vested interests. They will do all possible to minimise serious consequences for their industry.
I can just about tolerate your determined defence of leasehold, what I cannot tolerate is your talk of fairness, desist this moment. Much prefer my robber barons to be openly so, much like Nicholas Von Hoogstraten – as crooked a property man as there ever has been but without pretence that he was anything other.
Dear Stephen, it seems strange that Northern Ireland’s solution to purchasing the freehold is a very similar one to Justin Madders Bill. Fairness and common sense will prevail in this battle for freedom however long it takes.
The Justin Madders MP formula also provides a straightforward solution to the majority leaseholders of existing qualifying flat premises whose right to the freehold title was ignored in an original disposal (without prior notice/knowledge) and usurped through criminal breach of right of first refusal. ,
And to end forthwith the scam of the “informal” lease extension. racket; more often the result of such illegal freehold portfolio purchases.
The opinions and views expressed by Crispin Blunt and Justin Madders are seized upon as being correct
A review of their background shows they do not have any background in property law or valuation of leasehold matters and therefore whilst their ideas appear popular they are not robust to withstanding any critical examination
Legislative changes have to fit within the European human rights requirements that on a compulsory acquisition adequate compensation has to be paid. Whilst some feel that in the case of onerous rents this should not apply they advance no logical reason why in the case of normal ground rents why rents should not be capitalised at more normal rate of between 5-6.5% falling to 2.5% to 3.5% for indexed linked rents.
Many are trapped in shortish leases that need extending but the barriers preventing them are often the legal and valuation fees which weigh in heavily – the government can introduce prescribed capitalisation rates deferment rates and relativity which if based on the thousands of determined cases would be fair and deliver saving to lessees by the removal of the professional fees
European Convention for Human Rights Article 8 says :
1 Everyone has the right to respect for his private and family life, his home and his correspondence.
2 There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
“Respect for the home” .is what Government must deliver to home buyers and we want full compliance on :
-public safety ( means removal of combustible insulation by the legal owner of building )
-economic wellbeing ( means abolishing ground rents and forfeiture proceedings after sale ) ..
– prevention of crime
( means selling property to buyer under freehold title for legal ownership of building and service charge funds are operated by managing agents regulated under the Money Laundering Act. )
– protection of rights of others
( means collective enfranchisement of building must be given to buyers. of flats. ) .
As you know, and Good Squire Javid and his crew must know, freeholds can be acquired for less than 5% of total value of land plus leases. The canny investor can thus forth become Lord of the Land for a smaller investment than any one lessee tenant and have no further cost obligation to boot.
Then pray thee why sir are you always hereabouts banging forth about the rights of such freeholders?
Bad tenure law however old cannot be defended simply because it exists, what say you?
I fear this is the flaw in your arguments, no?
But kudos for effort.
William Wilberforce’s famous “Abolition of Slavery” speech, was delivered in the House of Commons on Tuesday 12 May 1789.
Mr. Wilberforce now rose and said:
When I consider the magnitude of the subject which I am to bring
before the House, a subject, in which the interests, not of this
country, nor of Europe alone, but of the whole world, and of
posterity, are involved: and when I think, at the same time, on the
weakness of the advocate who has undertaken this great cause,
when these reflections press upon my mind, it is impossible for me
not to feel both terrified and concerned at my own inadequacy to
such a task.
The situation is different now :
“slavery in 2018 ” means ” long leasehold slavery”
To draw a parallel between salvery and leasehold tenure is deeply insulting to those who endured salvery.
There was an employment tribunal case involving a premiership footballer whose restrictive contract was likened by his barrister to a form of salvery. The tribunal chairman regarded it as offensive to make such a comparison
What I find offensive – and deeply offensive at that, is you getting on your high horse and adopting moral positions. Stephen, when you decided to take the Tchenguiz shilling you forfeited the right to make judgements of a moral or ethical nature.
Slavery and leasehold are the same in their nature. Those who profited from slavery, and those who now profit from leasehold, are the very same kinds of people.
There was a story told about Sir Philip Green and of a visit to one of his London stores. He wandered the floors and randomly engaged with employees, most all of them knew their position and were suitably deferential. But one somewhat bold employee raised a long standing employment issue, she challenged Sir Philip. He was aghast, quite shaken, but composed himself and then delivered this withering response, “I own you”,
Slavery is no longer with us – at least no longer a legal enterprise, but the slavers did not go away. they found other enterprises of a similar nature to engage in, leasehold being one such. Go away with your mock outrage, it doesn’t become you, and in itself is outrageous.
It is GREED that has done for leasehold. Leasehold was always a misunderstood and unfair system that was weighted heavily against leaseholders. It was always open to abuse by freeholders/managing agents. the “trade regularity bodies” never served leaseholders, but served the interests of their true masters (the developers/freeholders/managing agents.
Until recently, such “unfairness” to leaseholders could be said to be “tolerably unfair” A bit like a shop allowing for a certain level of shoplifting!
Though leasehold could be shown to be palpably unfair to leaseholders, it generally wasn’t so bad that a real head of steam could be got up to end leasehold. Yes occasionally like an old volcano the issue might bubble up every few years, but the eruption would soon die down. But people in the industry got GREEDY.. TOO GREEDY! .
What started with Vincent Tchenguiz, McCarthy & Stone and Peverel/Firstport moved on to Taylor Wimpey,Persimmon and the rest!
They found the most ingenious and outrageous methods of extracting “value” from their artificially created leasehold assets. They followed the path laid down by Tchenguiz which showed how you could derive income from something that had never been thought of as an asset.And if you could persuade investors to lend money against these “assets” at periods of up to 150 years these schemes could be financed by debt.. For this to work though you need leaseholders to stay passive and simply pay up. This is no longer happening. Leaseholders have had enough. They are on to the scams. Not only do they have the talent, they have the determination. Who would have thought as About Peverel chugs away(offering support to victims of Firstport and exposing news that a charity such as LKP could not cover for legal reasons,) LKP and NLC could become such an overwhelming and significant force for change? And changes there have been. It is truly awesome , and a source of great pride to be associated with some really wonderful and principled people. They are truly the Suffragettes of leasehold. I would have wanted a statue erected to them outside parliament, but I refused to pay Longharbour £10,000 for permission! Some argue for the retention of leasehold or for compensation for loss of freehold. Those views are disingenuous. Thy hide the debts built up to purchase the freeholds. They hide the extra income these freeholds can derive. My message to freeholders/managing agents is that in your avarice you flew too close to the sun. you are about to crash to the earth..
Michael, correct me if I am wrong. This is my take on leasehold before it really took off and became the gargantuan scandal it is now. It was the custom in the north west of England, for instance, to sell houses on a leasehold basis, terms were long (999 years) and ground rents were relatively small and fixed at, say, between £5 and £35 per year.
House buyers in the area were ignorant and had no other option, leasehold was the way, most everyone bought on a leasehold basis in the north west. It was an irritation, but more so when they learnt of permission fees and of ground rent collectors using every device possible to extract further monies for supposed late payments etc.
But why exactly did the sale of houses on this peculiar leasehold basis exist at all, and why particularly in the north west? Speculation on my part, I believe that most of the land released for housing development in the area was formerly part of the vast aristocratic estates – The Lords Derby, Sefton, Gerard etc. And these barons thought it quite natural to retain title to the land. Relatively innocent – I do mean “relatively innocent” – given the barons sense of entitlement, and the device of leasehold was not some grand money making scheme. It was, in their eyes, maintaining the correct order of things.
Then titles were sold on to entrepreneurs, it was at this stage that the grotesque took over from the entitled paternalism of the great barons. And the grotesque has become ever more grotesque as time has gone by.
Leasehold is wrong whether it was a relatively harmless device of the barons to retain title to THEIR land, or the modern day device to extort ever greater amounts of money from ordinary people.
The above imaginative theory of how leasehold came into being and its transformation into what we have now is copyright. Any unauthorised use and further publishing will be met with the firmest legal response.
I am led to believe that one reason for leaseholds being so prevalent in the North West may be because many developments were built on top of coal mines, and technically speaking if the land that a development was built on was sold as a freehold, the freeholders would effectively own the coal situated under their land.
I won’t give my validation of that, Michael. “I am led to believe that ONE reason” and “may be” suggest that you are not convinced either. Coal mining areas of the north west are a small part of the north west region, anyway, yet leasehold dominates the entire region.