Property News

Do party manifestos go far enough on leasehold reforms?

The Conservative and Labour party manifestos published last week include policies to reform certain leasehold practices, including high ground rents and the sale of leasehold houses. But Leasehold Solutions says the policies do not go far enough to tackle other major problems with the leasehold system.

Louie Burns, Managing Director of leading leasehold enfranchisement specialists, Leasehold Solutions, said: “It is encouraging to see that both the Conservatives and Labour are paying attention to some of the problems with leasehold, such as escalating ground rents and the sale of new-build houses as leasehold, particularly as neither party even mentioned leasehold in their 2015 manifestos. The policies outlined in the respective manifestos are a first step in the right direction, but they are insufficient to bring about the reforms needed to free home owners from unfair leasehold practices.”

The Conservative Party manifesto includes a commitment to “crack down on unfair practices in leasehold, such as escalating ground rents.” However, although Prime Minister Theresa May previously stated in Parliament in March that she ‘doesn’t see why’ developers are selling new-build houses as leasehold, the Tory manifesto stops short of calling for policies to reform other aspects of the leasehold sector, such as banning the sale of new-build leasehold houses.

The Labour Party manifesto goes further, promising to give leaseholders “security from rip-off ground rents and end the routine use of leasehold houses in new developments.” Meanwhile, the Liberal Democrats’ manifesto makes no reference to leasehold reform.

 Burns continued: “While the sale of new-build leasehold houses has garnered much media attention, the number of these properties is the tip of the iceberg when compared to the volume of leasehold flats coming onto the market in Britain. Many people are also unaware of the implications of letting their lease length fall, which can significantly increase the cost of a lease extension when the time remaining on the lease falls below 80 years.

“Even if onerous ground rent practices are curbed or outlawed, the owners of leasehold flats will still be stung by high fees when they need to extend their lease or purchase their freehold. A better solution would be to abolish the unfair leasehold system, but regrettably none of the major political parties looks to be considering such a reform at this stage.

“The issue of onerous ground rent clauses certainly also needs to be addressed, but it’s equally important that we look again at leasehold valuations, as the system works to the benefit of the freeholder. Under the current valuation methods, which are heavily weighted in favour of freeholders, leaseholders are required to pay inflated fees to extend their lease or purchase their freehold, which costs property owners millions of pounds in additional costs each year.

“We also need a better mechanism for holding errant developers to account; before the leasehold houses scandal, many home owners were unaware that their freehold had been sold out from under them to institutional ground rent investors. These leaseholders are now quoted fees in excess of £40,000 to purchase the freehold, or they are being offered unsatisfactory solutions like converting their 10-year doubling ground rent to one linked to the rate of inflation.

“These are not solutions that will enable the affected home owners to purchase their freehold outright or free themselves from having to pay unfair fees for permissions and licences attached to the lease. We hope the next government will enact legislation to help these people to take back ownership of their freehold at a fair and realistic price.”

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