‘PPI’ of the house building industry

‘PPI’ of the house building industry

8:24 AM, 8th November 2017, About 5 years ago 2

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A Bill to set up a ‘PPI’ like compensation scheme for new home purchasers suffering from their house being set up as a leasehold has been passed for as second reading to be heard on the 2nd February.

The Bill to be debated in Parliament was introduced by Labour MP for Ellesmere Port and Neston  Justin Madders.

Madders was highly critical of the practice of selling a normally freehold house on a new build development as leasehold saying:

“We need similar process to PPI for those who have fallen victim to this scam. We need to give people the chance to fairly escape that trap.

“Abuses of the leasehold system have made huge profits for developers, while causing misery to thousands of people. Many owners of leasehold houses were led to believe that they were buying their dream home, but instead they were providing a revenue stream for an offshore company operating from a tax haven.

“While I welcome the Government’s proposals, they do nothing to address the injustice that current leaseholders face, many of whom feel trapped in properties with escalating ground rents because of the complexity and expense of the current system for purchasing freeholds.

“The current system allows freeholders to delay and put off people who want to buy their freehold. The whole process is extremely costly, archaic and lacks transparency. Great expense is also incurred in just proceeding to a Tribunal to purchase the freehold due to the practice of freeholders using surveyors and lawyers to argue for unrealistically high costs to purchase the freehold. The system I am proposing removes the opportunity for them to do that: by creating a simple formula set out in law to purchase a freehold there will be no need to resort to expensive and time consuming tribunals.

“There have been some examples of poor practices by both developers and solicitors and in those cases, there needs to be some form of redress that does not rely upon the victims handing over thousands of pounds in legal fees.”

Recent figures suggest as many as 10,000 New Build houses have been sold as leasehold. It is understandable how the uninitiated general public and First Time Buyers could be talked into accepting this is normal standard practice, but what on earth are solicitors advising their client purchasers?


by Michael Holmes

10:37 AM, 8th November 2017, About 5 years ago

A typical case of caveat emptor.

by Ian Narbeth

17:43 PM, 10th November 2017, About 5 years ago

The leases with rent doubling every 10 years are pernicious. Yes, caveat emptor but in many cases buyers won't understand compound arithmetic, even if their lawyer points the provisions out to them. Whether the landlord is in a tax haven or not is beside the point (the problem still exists if the landlord is in the UK) and Justin Madders should focus on the problem. His bill though appears to be directed at the problem of purchasing freeholds. Limit the doubling of ground rents to say once every 25 years and the problem is much less.

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