James Brokenshire announces consultation to cap unfair leaseholds

by Property 118

8:52 AM, 15th October 2018
About a month ago

James Brokenshire announces consultation to cap unfair leaseholds

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James Brokenshire announces consultation to cap unfair leaseholds

The Government’s proposal is for the vast majority of new houses to be freehold with ground rents for new leases capped at £10.

Housing Minister, James Brokenshire, said: “Unfair ground rents can turn a homeowner’s dream into a nightmare by hitting them in the back pocket, and making their property harder to sell. That’s why I’m taking concrete action to protect homeowners and end those unscrupulous leasehold practices that can cost tenants hundreds of pounds.

“This can also mean that selling their home is more expensive and take longer than selling a freehold property.”

Mark Hayward, Chief Executive, NAEA Propertymark comments on James Brokenshire’s announcement of a consultation to improve the leasehold sector: “Thousands of homeowners across the country are facing escalating ground rents, charges for making alterations to their properties and unable to sell their home. Therefore, it’s only right the government looks to crackdown on unfair leasehold practices to stop even more people feeling trapped in homes they cannot afford to continue living in.

“Our recent Leasehold: A Life Sentence?1 report found almost half (45%) of leasehold house owners didn’t know they were only buying the lease until it was too late, two thirds (62%) feel they were mis-sold and the vast majority (94%) regret buying a leasehold. This shows that for too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property.

“However, this announcement is only good news for those looking to buy a leasehold property in the future. With 4.2 million leasehold properties in England, many will remain stuck in their lease with no straight forward way out and the industry needs to help them.

1Opinium surveyed 1,103 homeowners who bought a leasehold house over the last 10 years, and currently live in it from 10th April to 8th May 2018.



Comments

Laura Delow

11:39 AM, 15th October 2018
About a month ago

I'm attending an event today about leasehold reform with 6 MP's from the Housing, Communities & Local Government Committee content of which is intended to be focused on promoting transparency & fairness in the residential leasehold sector & provide a better deal for leaseholders as consumers with a focus on:-
ENFRANCHISEMENT:-
i) simplifying the enfranchisement process & where not possible, reforms that may be needed to better protect leaseholders including the ability for leaseholders of houses to enfranchise on similar terms to leaseholders of flats ii) to examine the options to reduce the premium/price payable by existing & future leaseholders to enfranchise whilst ensuring sufficient compensation is paid to landlords to reflect their legitimate property interests & therefore a review of the existing valuation assumptions & the extent to which ground rent including rent review clauses should feature in the valuation & the role of yield & deferment rates & whether these could be standardised along with a review of marriage value, hope value and how these best feature in the valuation iii) to make enfranchisement easier, quicker & more cost effective (by reducing the legal & other associated costs), particularly for leaseholders, including by introducing a clear prescribed methodology for calculating the premium/price, and by reducing or removing the requirements for leaseholders to a) have owned their lease for 2 years before enfranchising and b) to pay the landlord's costs of enfranchisement, iv) to bring forward proposals for leasehold flat owners and house owners, prioritising solutions for existing leaseholders of houses.
Enfranchisement will cover a) the statutory rights of leaseholders to purchase the freehold of their house, b) leaseholders collective purchase of the freehold of a group of flats & c) extending the lease of their house or flat.
COMMONHOLD - to reinvigorate commonhold as a workable alternative to leasehold, for both existing & new homes i.e. to include a review of how it could be made easier for leaseholders to convert to commonhold and if so, how it might be possible to convert without the consent of the freeholder & all other leaseholders, coupled with making the commonhold model more sophisticated & flexible & what would be the most appropriate corporate structure of the commonhold assoc which would own/manage the common parts, all to include incorporating shared ownership, enforcement powers of the commonhold assoc etc
Interesting times!

ahloughlin@gmail.com

11:40 AM, 15th October 2018
About a month ago

Current leaseholders need protection just as much as new purchasers do. Not hearing much in this regard.

Laura Delow

9:39 AM, 20th October 2018
About a month ago

I wish I could report back with better more concrete news from the meeting held Monday 15th Oct which went as follows:- 50 attendees split over 7 tables with MP's as table hosts & a government note-taker per table. Three main questions were posed to the audience which in summary were:- 1) what are your experiences/concerns as a leaseholder ii) what advice from all quarters have you sought/received that has either helped or hindered iii) what can the Government do to help?
Sadly the event was poorly facilitated e.g. some MP hosts seemed genuinely interested whilst others came across as only paying lip service (one was more interested on what was on his phone!) and too much time was spent listening to peoples individual horror stories & although my heart went out to them, in my eyes it meant we got bogged down in detail & failed to achieve the meeting objective i.e. we did not give the Government clear & concise ideas/objectives of what they could/should do to help existing leaseholders aswell as how the landscape of home ownership should look for the future. Instead the Select Committee were given an excitable wish list of ideas which although can sometimes get one thinking outside the box to come up with a solution that may otherwise not have been thought of, I doubt helped in this instance.
They should have instead invited the same attendees to an earlier meeting (without MP's present) to sick up their horror stories & get things off their chests, then brainstorm solutions & test these against reality i.e. workable ideas / solutions to the current mechanical, methodology, legal & regulatory framework surrounding all things leasehold as you can't just tear up existing leases & landlords/freeholders investments must be protected. After this the MP's should have then joined the meeting to hear a summarised presentation followed by a question & answer session to drill down to the things the Government could consider doing i) quickly & ii) over the medium to longer term for existing leaseholders as well as how home ownership could/should look moving forward e.g commonhold and easier routes to enfranchisement etc.
We left the meeting having been told a report would be produced by February 2019 but not to expect any parliamentary changes for a further 2 years.
Although I left the meeting feeling frustrated, I did however leave feeling (fairly) confident the Government is definitely intent on changing the landscape of home ownership & not leave existing leaseholders out in the cold.
Let's wait & see.

Ms Leaseholder

14:50 PM, 20th October 2018
About 4 weeks ago

Laura thank you so much for your comments ! I was dying to be invited to that meeting but wasn't selected, and have been struggling to get any information about what went on. It's such a pity that better use wasn't made of the time & opportunity. And you have to wonder what the point is of putting in people who couldn't be bothered to get involved. Were managing agents and their lack of regulation & leaseholder lack of powers against them mentioned at all? Do you have any idea if it would be possible to request to be included on any future meets / processes, rather than leaving it down to pot luck? Thanks again for your informative post.

Laura Delow

17:19 PM, 20th October 2018
About 4 weeks ago

Reply to the comment left by Ms Leaseholder at 20/10/2018 - 14:50Hi Ms Leaseholder.
"Yes" managing agents (MA's) and their lack of regulation & leaseholders lack of power against them was raised rather vehemently from i) MA's ignoring leaseholders to ii) just MA's sheer incompetence e.g. in procurement &/or budget control, to iii) some horrifying stories where outright bullying & threatening tactics were employed especially when challenged over e.g. high service charges, to how difficult it is to nigh on impossible to challenge without going to First Tier Tribunal where in most instances an individual leaseholder finds themselves facing an army of lawyers representing the MA/Freeholder, to the abuse of the Section 20 process / costs (including the utter incompetence of ex council run blocks), all wrapped up with opaqueness / lack of transparency, and the leaseholder not being treated with the respect they deserve as "the Customer" who at the end of the day pays the MA's fees.
With regards the topic of lease extensions, it addressed the various dirty tricks employed by freeholders, which (even worse) the leaseholder's own valuer & solicitor are the biggest winners rubbing their hands together in glee over the fees they run up - example of an actual case; £45,000 statutory lease extension that got as far as the Tribunal's doors costing the leaseholder £21,627 incl VAT in professional fees i.e. Solcs/Valuers that would have increased to £32,703 (incl Barristers fees) had they gone through the Tribunal doors, yet on initially trying to pin down the Solc/Valuer to confirm ongoing fees, they were just given the amount they would charge per hour but never warned the leaseholder of how many hours on average are run up in negotiations & Tribunal preparation. This same leaseholder decided in the end to negotiate direct with the freeholder to extend their lease the informal non statutory route by the same 90 years for £5,000 less i.e. £40,000 with a ground rent of £100 pa increasing by £50 every 20 years vs nil to a peppercorn the statutory route, plus a few additional clauses that were negotiated, all for a total of £6345 incl VAT value/legal fees that covered both sides = £46,345 vs £66,627 the statutory route, yet their Solc tried talking them out of the non statutory route (as it lost the Solc substantial fees) on the basis the additional clauses were onerous & non negotiable, which those agreed on and negotiated by the leaseholder direct proved not to be as the freeholder was first & foremost motivated by remaining in receipt of some ground which the stat route did not give them, albeit the freeholder first tried to get £350 pa increasing by the RPI every 10 years but backed down to £100 pa + £50 every 20 years after the leaseholder held their ground.
There were more examples of worth discussed at this meeting but too many to list in this forum, suffice to say it's not just the freeholder that plays dirty tricks, hence the need for a more fair, clear, precise & rigid formula for lease extensions (or enfranchisements) that stops Solcs/Valuers from raping their own clients.
On the matter of securing a place at future events, forget it. It is a ballot reliant upon luck of the draw. I just happened to be lucky in this instance.

Ms Leaseholder

12:39 PM, 23rd October 2018
About 4 weeks ago

Reply to the comment left by Laura Delow at 20/10/2018 - 17:19
Wow there are some frightening stories out there! It must have been a bit monotonous to hear them but good to get them out - the extent of the problem is best highlighted with numerous examples - but I can imagine it was probably a bit emotionally drawn out, more than is productively necessary. I'm so glad that the MAs were discussed as well as highlighting the immoral behaviour of solicitors & valuers too. Everyone needs to be held accountable. You must have taken phenomenal notes Laura, thanks again,


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