Leasehold reform proposals could save homeowners £1,000s - MSE News

Traceymay

My home is the first property I have ever ‘owned’, though I realised far too late, that actually, I do not own a thing and that my home belongs to a freeholder, despite the fact I have a mortgage, so am responsible for all of the financial debt and risk, but none of the benefits of home ownership.

I have to pay £300 ground rent annually an amount at a level many mortgage lenders consider as onerous, so it is extremely unlikely I will ever be able to sell it. This is compounded by the fact that I have to pay uncontrolled, unregulated and unpredictable estate charges, building insurance premiums and management fees. Every year we receive letters saying that the management company has overspent and so we, the residents have to pay the extra. I thought I would know at the start of each year how much I had to pay, but no, the numbers are unpredictable. One year we received an extra demand for £1000 on top of our existing bills.

Neither my solicitor or the developer explained this to me, my solicitor confirming of the day of exchange, that I was now ‘a home owner’. Sadly, I have come to realise I am nothing of the sort.

Nitram22

I just purchased a 1 bedroom flat on a 75% ownership scheme in 2018 as I had to downsize and didnt want to rent. I didnt know much about leasehold and and went ahead with the purchase. I was never made aware of what a dwindling lease would cost by the estate agents or the solicitor they recommended me to have. My flat has 70 years left on the lease and I'm really worried about what the cost will be to extend it. I have only lived in my flat, that I love, for 18 months and now I'm thinking of just selling up as I dont want to become trapped in a flat that i thought was an investment.

DRVN1

So many negative comments on here about leasehold tenure.
Why?
Because everyone is suffering from the same misconception. A lie that is perpetuated and upheld as the general consensus of property ' ownership'. The universal belief that leasehold is the purchase and ownership of your property. This assumption is simply untrue.
You own nothing and I liable for everything.
That is the reall truth.
The human rights of Leaseholders is being systemically dismissed under the umbrella of a perceived benevolence of freeholders.
A freeholder is simply an investor.
An investor expects a return on their investment but all investors are informed and warned at every opportunity, that Investments may go down as well as up.
In fact it is the legal responsibility of those encouraging investment in their products to inform and warn of such.
There is no such legal responsibility apparently Lee on those who undertake a leasehold agreement to be warned or fully informed of exactly what the financial penalties and losses will be. And they will be losses. There is no 'possible' about it.
Freeholders seem unable to accept the standard acceptable principles of investments involving risk.
Despite all the horror stories, all the mental anguish related in harrowing and heart breaking stories of financial ruin, leasehold tenure continues to be supported by the legislation that does not protect those who are most vulnerable. How shameful that nations within our United Kingdom who are widely perceived to be pioneers of freedom, yet retain and choose to actively maintain, the last bastion of an abhorrent and feudal leasehold system, long since shed by the rest of the civilized world.

PhyllB

The Law Commission report recognises that leaseholders and freeholders have competing views that are genuinely held and irreconcilable. Decisions about which side to favour, and how to strike the balance between the competing interests, depend to a large extent on political judgement [3.11]

This is way beyond solving with an easy compromise. many of us are having a terrible time with unsellable and unsafe properties. We need this government to have the courage to abolish leasehold.

simondv

Worzel Gummidge

"The leaseholder wouldn't want it." (The freehold)

The freehold has worth because it is an income stream to an investor. Original freeholders were genuine land owners, few are these days, they are usually remote investors looking to exploit captive leaseholders.
I am sure any leaseholder would not want to be bought and sold to be an income stream for a remote entity.
There is plenty of evidence that home buyers of new build leasehold houses asked to buy the freehold interest at point of sale. The developer could have offered it, instead lied in some cases saying it could be bought for a set price after 2 years. The developer sold on the freehold to a 3rd party investor, not to the home buyer as promised.

Keith_hince

Leaseholders have been very patient, Government keeps promising change & we are disappointed with this report. Just Abolish Leasehold like Scotland did, stuff the human rights of Freeholders. We are very angry, get on with it Borris

Darkslider

The issue is if you had to sign a copy of your receipt when you bought your ten or twenty quid kettle, you'd probably sign it without reading it. Or if you did read it and didn't fully understand it, or what a leasehold kettle was, you'd still sign it anyway, because it's an insignificant amount of money.

Of course, you wouldn't apply the same method of thinking to the largest purchase of your life totalling hundreds of thousands of pounds would you?

Only some people have, and now they're being told they're going to have to pay increasing amounts of rent to keep using their kettle, it's impossible to sell on and they now can't afford to buy a new one, despite being told by the checkout girl at Argos (who had a heavily vested interest in selling leasehold kettles) that this wouldn't be the case and the kettle freehold could be purchased for <%1 of its cost after two years.

I have sympathy for those that have been misled by developers and solicitors, but when purchasing my first house I made owning my own land, bricks and mortar top of my list of priorities above all else, which discounted lots of lovely looking new build properties on well presented estates. I just can't understand why anyone else would do differently when buying a house, much less take a housing developer or their free appointed conveyancer's word on the matter.

It must be a sad situation to find oneself in, I sincerely hope a resolution can be found. If the banks can be made to pay back millions in PPI payments that were taken in similar instances of mis-selling and being misunderstood by borrowers, there's hope that such a solution exists for the housing market.

Tom99

[FONT=Verdana, sans-serif][FONT=Verdana, sans-serif]The Law Commission has published it’s report on reducing price payable when extending lease or buying freehold. [/FONT][/FONT][FONT=Verdana, sans-serif][FONT=Verdana, sans-serif]The report and the summary can be downloaded from here:[/FONT][/FONT]
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http://www.lawcom.gov.uk/project/leasehold-enfranchisement/[/FONT][/FONT]
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The report does not recommend any one option but sets out three main options each with 7 sub-options for the Government to consider.

Three main options:

1 – Marriage Value shared 50/50 as existing law.
2 – Marriage Value not paid by tenant therefore tenants with <80yr lease benefit.
3 – Hope Value paid by tenant being less less than 50% of Marriage Value.

The seven sub-options which could be applied to any of the above 3 main options:

1 – Online calculator for premiums using prescribed rates for valuing ground rent and reversion.
2 – Cap value of ground rent based on 0.1% of market value. For example if a flat is worth £250,000 with a new long lease then any ground rent above £250pa would be ignored.
3 – No payment for development value. For example a block of flats has the potential to add additional floor to roof level.
4 – Preferential rates for owner occupiers over investment owners.
5 – Remove 80yr cap for sharing Marriage Value.
6 – Remove discard of tenant’s improvements.
7 – Remove discount for tenant holding over at end of term

The following have been rejected as viable solutions and all the above options continue with the current valuation method of separately valuing the ground rent (term) and reversion:

1 – Premium being just based of multiple of ground rent, for example 10x ground rent.
2 – Premium being based of multiple of long lease value.

There is a further report due in the spring covering the other aspects of enfranchisement.[/FONT][/FONT]
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I think there are two things in this report leaseholders should press strongly to be introduced:

1 – Ignore marriage value. Marriage value is entirely created by the reduction in the leaseholders market value as the lease gets shorter, beyond what from a pure mathematical point of view should be the case. The freeholder does not contribute anything to marriage value, their interest will continue to increase year on year as the lease gets shorter.
2 – The online calculator at predetermined rates.

The next report will maybe cover things like the 2yr waiting period and costs.
With regard to costs if you have an online calculator to fix the premium then the freeholder surveyor/valuer costs could be reduced because the only variable would be the value of the new long lease.
The same goes for legal costs, a standard template could be specified which must be used. [/FONT]

GDB2222

Marg55 wrote: »

It is a very disappointing report. Upon retiring I used some of my pension money on a flat for my son to live in while he completed his PhD. Far from being an investment for my children, it has turned into a financial drain. The freehold is being auctioned but we can't get hold of the details about it. The management charges have ramped up to £1700 a year with the management company charging this for two years for painting on a separate block which has not even been done ... Leaseholders of flats have more protection than the unfortunate people who have bought houses, only to have the freehold sold. Where is the emphasis on the human rights of leaseholders? Scotland managed to get rid of leasehold, so why can't England? Freeholders speculated for financial gain. Leaseholders thought they were buying property not time and the potential to be financially abused on an often outrageous scale.

Leaseholders have the right to take over the management of their block. I have a flat in a block where this has been done most successfully.

Ron_Rose

Please Please Please remember this is a proposal of a possible solution by the Law Commission. The Full report states that this proposal is based upon and reflects the human rights of the freeholders. It was instigated by a 10-minute rule bill that asked for reform along the lines of a ground rent multiplier. It has cross party support and Sir Peter Borromley is championing it through parliament and is very active in this. We should all write to our MP's and demand their support.
Ron