Leasehold experts say manifesto proposals fall short

Reformed leasehold policies set out in party manifestos have received criticism for not going quite far enough.

Despite proposing new policies to deal with unfavourable leasehold practices, key figures within the industry have stated that the Conservative and Labour measures fail to address other key problems within the leasehold system.

Commenting on the purported gaps in policy was Louie Burns. The Managing Director of Leasehold Solutions stated that although recognising leasehold problems is a positive step, the proposed measures are not quite enough to free homeowners completely.

“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 homeowners from unfair leasehold practices.”

A “crack down on unfair practices in leasehold such as escalating ground rents” is one of the proposed measures in the Conservative manifesto, aiming to curb the unfair practices which have commonly featured in the headlines over the past year. However, the manifesto does not include reform for other areas of the leasehold sector such as the sale of new-build leaseholds, an issue which has been especially problematic for first-time buyers.

Going slightly further is the Labour Party manifesto, promising “security from rip-off ground rents” as well as the end of “routine use of leasehold houses in new developments”.

The Liberal Democrats, however, make no reference to leasehold reform in their manifesto.

Mr Burns went on to mention the lack of public awareness around leases and the potential problems that may arise later down the line.

“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.

He also highlighted the need to address the balance between the freeholder and the leaseholder in certain respects, such as the current way in which leasehold properties are valued.

“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.

Mr Burns concluded by drawing attention to the unfair tactics of developers and expressed hope towards the next government protecting current leasehold owners and preventing such problems from occurring in the future.

“We also need a better mechanism for holding errant developers to account; before the leasehold houses scandal, many homeowners 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 homeowners 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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