Have leasehold agreements outstayed their welcome?
New light has been shed on the extent of malpractice within the leasehold property market.
A recently released report from HomeOwners Alliance aims to provide greater clarity on the scale of the leasehold property market, as well as highlight the lack of consumer understanding and widespread malpractice within the market.
Entitled ‘Homes Held Hostage’, the report draws attention to that fact that under the law, 1.577 million ‘owner-occupiers’ in Britain do not truly own their own home. It states that the country’s well-documented homeownership crisis is being exacerbated by this fact; had these figures been included in those released by the government, the actual rate of homeownership in the UK would fall to 58.9% – a level which bears resemblance to the early 1980’s.
The research also found consumer confusion around the leasehold system, with a significantly high amount of properties requiring extensions to their leases as soon as possible.
Of those asked about their current lease, just 58% were aware of its length, with 24% of these stating that it was under 80 years. Further analysis of these figures indicated that the total cost of extending these leases could amount to over £4 billion.
Additional research also indicated that under half of the adverts displayed on property websites were clear as to the precise tenure of a property. Just 49% of flat listings clarified whether the property was share or leasehold, whilst only 24% specified the length of time remaining on the lease.
This is not the first time leaseholds have been scrutinised for their clarity. Most recently, cases of new buyers from around the country revealed the onerous nature of certain leasehold provisions; with terms such as rent doubling every decade, leaseholders were left struggling to sell their property. Third-party purchasers of freehold had also led to problems for those new to the property market. Having originally been quoted one price, consumers were often left horrified when they found the cost of their freehold had rocketed.
Commenting on the reports’ publication was Paula Higgins. The HomeOwners Alliance Chief Executive stated: “Leasehold ownership can be traced back to the Domesday Book and it is a practice that should be relegated to history. Unscrupulous and avaricious actors within the property industry are using sharp leasehold practices to line their own pockets and fleece householders. Developers and estate management companies rely on leasehold to bamboozle consumers, charge exorbitant administration fees, ever increasing ground rents and render properties unsellable.
“The situation is exacerbated by the fact that many estate agents are themselves ignorant about leasehold and fail to inform and educate their customers properly. The Government needs to take urgent legislative action to protect people from these practices, help people who are already trapped and avert a full-blown crisis. Our report highlights the problems and makes a series of simple and sensible recommendations that could be introduced.”
Labour’s Shadow Housing Secretary, John Healey, also commented on the challenges highlighted in the report. He stated: “This report shines new light on the difficulties faced by some homeowners who own their home on a leasehold basis – often in the dark about the exact terms of their lease and currently unprotected from punitive terms including huge rises in rip-off ‘ground rents’.”
With an aim to prevent the abuse of leaseholds, the report sets out ten recommendations for policymakers to consider:
- Commit to scaling leasehold back
- A review of the leasehold system
- Stop the creation of new leasehold homes
- Stop the doubling of ground rents
- Mandatory commonhold tenure for newly build flats or apartments
- Lease extensions to be a minimum of 250 years with a peppercorn rent
- Leasehold contracts to be standardised
- The purchase and sale of leasehold properties to be made faster and fairer
- The provision of accurate and timely information for buyers
- Extend the right of private leaseholders to other groups
Commenting on the release of the report was Beth Rudolf. The Director of Delivery at the Conveyancing Association stated:
“While we congratulate the HomeOwners Alliance on its Leasehold Report, we would not want to see unnecessary concern amongst leaseholders that they do not own their property in ‘the eyes of the law’ as the report suggests. This is clearly not correct and leaseholders should know they have complete security so long as they comply with the terms of the lease. Plus, it should also be clear that there are mechanisms enabling them to extend their lease when required, albeit at extra cost.
“We are concerned that the implication that leaseholders are not legal owners could be considered scaremongering, which we do not support in any way, however we can see that this approach has brought the report to the attention of the mainstream media and the more people who are aware of the importance of obtaining all necessary information prior to buying a leasehold property, the better educated homebuyers will be.”