Leasehold Solutions calls Housing Minister’s select committee evidence a disgrace

There are problems with escalating ground rents and the MPs don't seem to appreciate the vast difference between a ground rent doubling every 25 to 30 years (OK and roughly in line with inflation) and doubling every 10 to 15 years (seriously onerous). However, Louie Burns is also guilty of misunderstanding leases. I comment on his remarks:
"..the lease does not spell out the all terms by which the leaseholder will be bound. For example, the terms will not contain: the fees a freeholder will demand for service charges; fees for any ‘major works’ for which the leaseholder will foot the bill;" This is not correct/misses the point. It is impossible in a 125 year contract to spell out amounts of service charge in future years. It should be well-known that service charges are kept low for the first few years and then increase when the true cost is charged. That said there are substantial statutory protections for tenants and landlords may find they can only recover £250.

" ‘administration fees’ the freeholder will demand for collecting service charges or late ground rent payments; or fees for licences and permissions." Again these cannot reasonably be fixed for 125 years. The fees for collecting SCs and late payments are generally not large. Fees for licences and permissions vary and in some cases tenants are ripped off. However, where a tenant proposes substantial alterations to a flat in a block the landlord has to take professional advice from engineers as to the proposed works. You can't have a blanket "fee" for approving works. It all depends. If the freeholder cannot insist on the leaseholder paying for such professional advice the alternative may be far worse - badly done works that threaten the structure of the block and the safety of residents.

“Perhaps most importantly, the lease terms will not indicate the costs to extend the lease or buy the freehold in the future, which are essential if the leaseholder intends to maintain ownership of their property." What a ridiculous comment! The cost of buying the freehold varies over time and will increase as the lease length shortens.

“By citing caveat emptor (“buyer beware”) Wheeler is blaming leaseholders for getting themselves into such a mess. Leases are incredibly complex and often worded in a way that purposefully hides the true meaning of the terms for the freeholder’s benefit.
I read Wheeler's testimony. She points out that leaseholders can read the lease and if there are 13 pages about fees that would be charged that should hit home.

What nobody has commented on is that buyers, especially first time buyers expect to get their conveyancing done cheaply. Leasehold conveyancing involves at least twice as much work as freehold. It can take several hours to read through a lease and prepare a report on it. It is unrealistic to expect that a senior lawyer will review a 50 page lease if the conveyancing fee is under £1000. That horse has bolted and whilst sellers happily pay 1 1/2 to 2% fees to selling agents, solicitors are lucky to charge 0.5%. Yes leases are complex but some buyers never read them properly. If you can't be bothered to read carefully through a document on a £300,000 purchase then you are a foolish buyer.

Just to make anyone aware who wants to help fight for action on the matter of leases - there is a facebook group at:
https://www.facebook.com/groups/nationalleaseholdcampaign/about/
You can also sign a petition at:
https://petition.parliament.uk/petitions/238071

you do not really expect a politician to have knowledge of their brief? no qualifications required--and it shows!

I think Louie'scomments are pretty much spot on. Wheeler is just standing up for developers who line the Tories pockets. As for Ian's comments I would suggest that first leases are written in legalese and all the fees and charges are not spelt out clearly. Therefore the vast majority of purchasers dont grasp the issues initially (until of course they are stung). They are only understood by the professionals and freeholder/developers.

Reply to the comment left by Adrian Alderton at 19/02/2019 - 10:45
Michelle thanks for the links, i'll be signing the petition.

Reply to the comment left by Adrian Alderton at 19/02/2019 - 10:46
Excellent. Obviously the more signatures the better!
Having never before bought a leasehold property I had cause to dig out my lease a couple of days ago. Lo and behold there is a big problem (ground rent to double every 15 years until the end of never!)
Despite the ridiculous outcome of the consultation, this is an huge scandal that has only just begun to rear it's head.
I am on the case and had an extremely interesting conversation with a specialist today. Don't want to say too much but anyone in the same position can pm me for more details.
Please, please sign the petition even if you are not personally affected.
Thanks
Michelle

Reply to the comment left by michelle green at 19/02/2019 - 18:26
P.s. And dig out your leases...and check them! (Yes..I know horse bolted etc)

When I worked at a mortgage trade body it was brought to my attention that some new homes were being sold with ground rents that doubled every 10 years. After 5 minutes of modelling this on a spread sheet it was clear to me that these properties had NO VALUE because the ground would grow exponentially in real terms. For example, a ground rent starting at a modest £100 would grow to £102,400 after 100 years, (£14,000 in today's money assuming inflation of 2% a year).

I warned lenders but at that time some told me they weren't concerned because they were only lending for 25 years and over this period the ground rent would remain manageable. This is not a good argument as it ignores the long term value of the property, which is fundamentally undermined by the ground rent escalator.

If solicitors and mortgage lenders didn't understand the time bomb of these ground rents how could an average first time buyer? Even a friend of mine who was a professional investor bought a flat with such a ground rent clause - when he realised the implications he sold it. He discovered that the freehold had been sold by the builder (a household name) to a new owner based off-shore so that it was impossible to know the true beneficial owner. This stinks! house builder management knew these ground rents were a rip off - what a way to treat your customers! These, of course, are national house builders that have made a fortune out of the government Help-to-Buy scheme. The government should clamp down on them hard.

Reply to the comment left by michelle green at 19/02/2019 - 18:26
Michelle
How do I pm you

Hi George - just realised I`m not sure you can PM on here. Maybe someone can advise.
If you have an issue with an onerous/doubling lease or exhorbitant service charges there are some good sites that can help you (including this one!)
Also:
https://www.leaseholdknowledge.com/lkp-welcomes-privatisation-leasehold-advisory-service-wait-2020

You can get free advice from LEASE (you book 15 minute telephone appointments), but they will help you to interpret the (unfair) law and they will help you to interpret parts of your lease you are unsure about.

There is also an excellent facebook page

National Leasehold Campaign ( NLC )