Student Spotlight: Lucy Foxall Discusses Punitive Leaseholds

Government Plans

Last year the Government announced their plans to “tackle unfair practices in the leasehold market”, claiming that over the last two decades, the number of new builds being sold as leaseholds have “more than doubled”. The point being that this creates a revenue for the freehold owners, meaning first time buyers are deprived of the opportunity to ‘bag up’ a new build for themselves.

Statistics suggest that most properties are owned through leasehold’s, and while this may appear the most popular choice of ownership, there too comes a string of disadvantages with this purchase option. To name a few, this was the outcome of a fairly recent government report on the issue:

• Poor value property management;
• Disproportionate costs to extending leases; and
• Costly and slow processes to sales

What are lenders saying?

If these issues weren’t already enough, some new builds also contain clauses that are doubling their ground rent each decade. Last year, one of the UK’s largest bank lenders ‘Nationwide’, spoke out about the issue. They declared that they will no longer be giving mortgages for new build leasehold properties that include these “punitive terms”. A Nationwide spokesman suggested that the reason for this is to make sure onerous terms like this are controlled.

What is to be done?

There has been much discussion over punitive leasehold’s over the past couple of years. The government have said that they intend to introduce a ban on the future sale of new build properties as leaseholds. They have also encouraged freehold owners to “soften” their leasehold terms. In what is now being described as a ‘leasehold scandal’, housing Minister Heather Wheeler has stated that in her opinion, the best way to tackle unfair leasehold terms is to get freeholders to voluntarily change their contract terms. Wheeler argued that it would be extremely costly in obtaining legal advice on the matter, thus would be far better to go with the “voluntary approach”.

It is not a secret that many leasehold owners are outraged about the approaches taken to tackle this “scandal”. I wonder how this will be resolved?

Justin Madder’s (Labour MP for Ellesmere Port and Neston) actually proposed a new Private Members Leasehold Reform Bill early 2017 which was to be introduced late last year. This Bill was proposed to introduce a new statutory formula for enfranchisement and lease extension. In Madder’s words, the Bill was important as it was to create a system where the purchasing of freeholds was less costly. This would free “tens of thousands of people… from the leasehold trap”.

The Labour MP agreed that too many people were being trapped into unfair lease terms and something had to change. This Bill was to finally do something about the so called “leasehold scandal” and find out what had been going on. Finally, October 2018 the proposed Bill was launched. Thus far it has been through the first stage of reading and a second reading is yet to announced . Nevertheless, Madder’s remains hopeful that this Bill will change thousands of people’s lives.

1 Comment

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    The basic problem is the incredible turnover of housing etc ministers over the last 20 years which has left few office holders with time to do more than bemoan the lack of new houses.

    As a result landlords and developers have been left free exploit

    The Government needs to secure a cross party commitment to continuity at ministerial level. Frank Field would be my choice

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