“Words empty as the wind are best left unsaid” – Homer
Empty and broken promises are all leaseholders have heard over the last three years from our Government on leasehold reform. As we speak, there has not been one singular change to it at all! Leaseholders have, at the request of Government, spent thousands of hours informing them of the real every day abuses they suffer at the hands of amoral freeholders who are aided and abetted by our outdated feudal land tenure of leasehold legislation. We have proved beyond doubt that this is a deeply iniquitous system and a shame on our country.
Literally the only dissenting voices being heard on the leasehold reform debate come from freeholders and their oily cronies who make themselves rich at the expense of hard-working leaseholders.
Enough is enough. We demand change and quickly. It is fair to say that the politics of our country have been nothing to be proud of over the last couple of years but even these political parties now realise that leasehold reform is now a real vote winner.
We have been waiting expectantly for months for the Law Commission to release their suggestions to amend the valuation principles in October to make it “quicker, easier and cheaper” for leaseholders to extend their leases or purchase their freehold. In a worrying turn of events this week though, we discover that this has been quietly postponed until November. Why? We don’t know. Did they show their findings to Government and were told to water them down or make them more radical? We hope for the latter but fear the former. To help them decide i have compiled a list of the top ten main things they must change immediately. There are numerous changes that must be made to leasehold legislation and if I included them all this blog would be longer than anyone could bear.
So, to help the Government, the Law Commission, The Ministry of Housing, Communities and Local Government, The Competition and Market Authority and Trading Standards, here is my list:
1 – Legally ban the sale of all future leasehold houses
Although this is spoken of by the Government and media as if it’s a done deal and the law has been changed, it’s not. This needs to happen now to send a clear message to developers that their underhanded leasehold machinations were wrong and must be made illegal in the future. Signing the pointless ‘Freeholder’s Pledge’, which is nothing but an ill-conceived publicity stunt in a desperate attempt to self-regulate, is not enough to end the leasehold scandal, the law must be changed.
2 – Make future ground rents zero on all newly built flats and houses
The same applies to their promise to make all future ground rents to be a zero sum. Lots of promises but no action. New build leasehold properties are still being built with onerous ground rents. They need to be outlawed as a matter of urgency.
These changes do nothing to help those already caught in the leasehold trap, but they are vital as a sunset clause on the whole leasehold scam. Freeholder and their cronies will have no further interest in leasehold once they lose their ability to extort leaseholders for their hard-earned cash.
3 – Prescribe the valuation elements for lease extensions and freehold acquisitions
On the leasehold reform debate all we bloody well hear about is the human rights of freeholders. “The leaseholders signed the lease willingly” they bleat. Utter tosh. However, a quick and significant win for the Government would be to prescribe the various valuation elements in favour of the leaseholders. This is not governed by contractual law but rather by mercurial and dodgy case law. To change it would not affect anyone’s human rights at all.
We suggest that the capitalisation rate be set at 8%, Deferment at 6% and relativity set in stone to favour freeholders. Act rights deductions are total and utter nonsense and should be scrapped immediately.
The message that the Government wish to make it easier and cheaper for leaseholders has not filtered down to the Tribunals. They continually make unfathomable decisions that favour freeholders even more and cost leaseholders thousands of pounds extra when extending their leases. For example, the battle on cap rates saw tribunals earlier this year awarding freeholders a cap rate of 3.35% and only a few weeks ago we had ‘Zucconi’ which informed us we should use a prime central London graph when calculating relativity everywhere in the country. This will cost millions of leaseholders thousands of pounds extra when they extend a lease which has fallen below 80 years.
4 – Remove the burden of paying for the removal of flammable cladding from leaseholders
Leaseholders were not involved in the construction of their flats. They had no say or influence in the materials used in their construction. They were not present when planning officials signed off the works and materials as being safe and up to standard. They bought their flats in good faith. Trusting that the developer used only safe materials and that the building would only be signed off by planning officials only if they were up to standard.
They now find themselves as the ones left holding the can, conned by a process they had absolutely no involvement in. They are told that they must pay the millions of pounds required to make their home safe.
The government should pay for the removal of the cladding. The developer should pay for the removal of the cladding. The freeholder should pay for the removal of the cladding, after all, they are so keen to tell us that they own the building.
The only group of people who should not pay are the leaseholders who bought those properties in good faith.
5 – Stringently regulate managing agents
This is singularly the biggest area of malcontent in leasehold. Freeholders will do anything to retain the ability to run the management of their buildings because they make an absolute fortune from them. Many are obstructive, combative, refuse to account for the money they receive, refuse the manage the buildings in a fair and transparent manner and have a whole bag of tricks to make money from their ‘sitting duck’ leaseholders. The law must be changed now to eradicate this.
6 – Change the qualification criteria for freehold purchases and Right to Manage
Many freeholders take specific advice in the construction stage of their buildings with the sole purpose of ensuring that the building will not legally qualify for a freehold acquisition by the leaseholders or the Right to Manage process. This traps leaseholders indefinitely in the tricks and costs of management. There is no other area in commercial life where such a blatantly unfair arrangement exists.
Altering the qualify criteria for buildings to enfranchise or carry out a Right to Manage process would free many thousands of leaseholders.
7 – Ban the AST loophole
A leasehold property which has a ground rent of more than £250 in the country or £1,000 a year in London can be turned into an assured shorthold tenancy by a freeholder. That’s right, they can force forfeiture of your property and make you a rent paying tenant. This is blatantly crazy, unjust and plain immoral. I’m not sure any freeholder would have the balls to do this in the current leasehold political climate, but we see them every day using the threat of this to bullying leaseholders into pay huge fees to extend their leases or carry out a Deed of Variation.
This unintended legal loophole must be closed asap.
8 – Introduce Right to Manage for estate charges
Owners of freehold houses find themselves trapped having to pay often exorbitant estate charges which are assigned to a company that own these estate charges by way of a feudal rent charge. They have no right to change their rent charge owners. The owners of these charges have no legal obligations to make their charges reasonable. The owners of the houses have no legal right to challenge these fees. The rent charge owner has no legal obligation to issue a demand for payment of these fees, but should they be late they can grant themselves a superior lease over the house. To free themselves of the lease the house owner must negotiate to buy out this lease but the there is no legal option that this fee should be reasonable nor in fact removed at all.
Nothing in leasehold illustrates how this feudal system is unfit for purpose in the 21st century more than estate charges held by way of rent charges. It defies logic, fairness and is almost unbelievable that this forms part of our current property market. We need to end it now and give owners of these houses an easy to use Right to Manage option.
9 – Ban informal lease extensions and freehold purchases
It is pointless amending any of the above laws unless we make illegal the option of buying your freehold directly from your freeholder or extending your lease in the same way. Cunning freeholders use their comprehensive knowledge of leasehold and they build in future ways to strip the property of thousands of pounds of its capital value. They sell the freehold houses this way but refuse to remove the revenue generating fees for licences and permissions. Often a property is made unsellable the day the terms of the informal deal are signed. How is it fair that freeholders can use their knowledge of a ridiculously complex legal system to rob leaseholders of their future?
Ban all informal deals completely and free leaseholders from the avaricious designs of their freeholder once and for all.
10 – Make forfeiture of leasehold properties illegal for minor infringements
A leaseholder can have their property forfeited if they owe ground rent of more than £350 to their freeholder or any amount at all for more than three years. Also, if they cannot pay their service charges or fees for major works. If they have inadvertently contravened the terms of their lease like making internal alterations, subletting without permission, inadvertently letting out a property in good faith but finding the tenants were committing some illegal activity in the property without their knowledge. Or if their ground rent exceeds more than £250 pa (£1,000 in London) and for another whole list of minor infringements.
This has to stop. Forfeiture is a draconian and disproportionate punishment which means a leaseholder loses their flat forever and a freeholder gains the windfall of a property because someone owes them £50 in ground rent or changed a kitchen without their permission.
In medieval times landowners, looking to strip the serfs of their land, constructed huge lists of ‘offences’ which, if breached, would result in the serf losing the land and the landowner would simply sell it to someone else. These crimes included hunting in the woods without a licence, being found drunk on the manor or being accused of being a witch. It is to our deep shame that the spirit of this feudal practice is still a legal method used by landlords to steal the property from us ‘serfs’.
End it now.
What you can do now.
Petition your MPs harder than you have ever done before. Email them, write to them, phone them go and visit their surgeries and meet them face to face. This is now the most crucial point in our battle for leasehold reform. We need to make our voices heard now or we could lose the change of significant leasehold reform for another couple of decades.
My apologises if I did not include your particular leasehold issues in my list (I have a very long list of changes I would like to see)