Conveyancer comments on Leasehold reform proposals
Following a recent article regarding leasehold reform possibly not helping leaseholders enough, some conveyancers believe that freeholders’ rights and needs should also be considered. Are ‘multi-millionaire’ freeholders exploiting the system or innocent pensioner investors being ignored?
In their critical report on the Law Commissions reforms, Leasehold Solutions claim: “It is also disappointing that the Law Commission is proposing to Simply tinker with existing legislation when more radical reform is desperately needed.
“Leasehold Solutions has been campaigning for leaseholders’ rights since 2002 and knows that whenever reforms are made in a piecemeal fashion, the result is multi-millionaire freeholders and their cunning lawyers challenging reform at every stage, thus completely thwarting attempts to improve the system for leaseholders.
“We believe that just tinkering around the edges will just allow this cycle to repeat itself, wasting millions of pounds of leaseholders’ money in future lengthy legal battles.”
In contrast, Paul Sams, Partner at Dutton Gregory Solicitors claims: “I find it very frustrating that people seem so upset about the Law Commissions proposals for reform on leasehold matters. I expect that a lot of those in the media, who like to paint landlords/freeholders as being the devil incarnate, did not bother to submit their proposals to the Law Commission. I know I did.”
Some of the arguments made by leasehold Solutions refer to the language that is used by the Law Commission and the ambiguity or contradictions that can be made. According to the Leasehold Solutions Briefing Note on the Law Commission point 2.24, which concerns leaseholders obtaining freehold status for their property, they believe that by the Law Commission, using language like “’ensuring sufficient compensation is paid to landlords.’ Such compensation will favour the landlord…Leaseholders have for a long time suffered at the hands of rapacious freeholders and their machinations to extract more money. It is impossible to make the leasehold extension process ‘easier, cheaper and more transparent’ without affecting how the freeholders are currently compensated. Therefore, this seems worryingly contradictory.”
In reply to the arguments concerning the plight of leaseholders, Paul Sams, Partner at Dutton Gregory Solicitors claims: When it comes to the level of service charges being charged by a landlord, I agree that limits should be in place. They should not be allowed to charge what they want and need it to be reasonable.
“However, with ground rent, I take a different view. We live in a capitalist economy. If a buyer is willing to pay a certain ground rent, then why should we be agreeing to limit ground rents because owners made bad decisions or were poorly advised by their lawyers at the time of purchase?
“My profession has become overly concerned about the 1988 Housing Act that may mean that ground rents above £250.00 could allow freeholders to claim that they can forfeit the lease for non-payment which has caused mortgage lenders to panic. A simple piece of legislation to state this will not be the case would suffice.
“What the media and my profession forget is that one of the largest groups of commercial landlords that hold freehold reversions are pension funds. They hold the freehold reversion as a safe way of receiving income from the ground rents, from the leasehold properties, within the blocks they hold the freeholds for.
“Limiting, or heaven forbid, removing ground rents, will severely undermine everyone’s private pension. Is that what the ‘do-gooders’ intend? I am not saying the system is perfect, but the demonization of freeholders has to stop to have them engage in the process, so we can all see if a better solution can be reached.”
Whether the reforms allow ‘multi-millionaire freeholders and their cunning lawyers’ to exploit the current system, or, innocent pensioners potentially losing out on the investments made on property is up for debate. In essence, the Law Commission’s intentions are certainly firmly balanced on the tightrope between the two concerns.
Do you think these reforms line the pockets of the multi-millionaire freeholder and their lawyers? Or, should the reforms take our capitalist economy and investors’ needs into deeper consideration?