Chris Blythe: time to fix the leasehold rip-off
It was with some disappointment to see the underwhelming 240 words set aside in the Housing White Paper on the matter of leasehold and the exploitation going on at the moment.
Sure, it says: “We will therefore consult on a range of measures to tackle all unfair and unreasonable abuses of leasehold.” But really this just prolongs the abuses and will accelerate before any changes are made.
I would have preferred to see consumers’ interest put first and if necessary any changes to legislation could be backdated to negate any dash to beat the changes by developers and freeholders.
At the heart of the issue is the relatively recent practice of shorter leaseholds with increases in ground rent included in the contract not properly explained or hidden. Some may say is the conveyancer’s job to explain it to their clients, but in a market where there are more buyers than sellers, these sellers can and do abuse their position. Along with management and service companies, again often connected to the developer, the leaseholder gets a bad deal.
It gets worse, though, as freeholds get sold and passed on to speculators who either impose big ground rent increases or charge a fortune for the freehold to be bought out.
There is no real reason for this practice other than house builders taking advantage of buyers desperate to get on the home ownership ladder.
It is clear that the Commonhold and Leasehold Reform Act 2002 has failed to put the consumer in the driving seat because it’s the developer/housebuilder/freeholder that decides on the arrangement at the start of a development.
Maybe it’s time to make commonhold the default arrangements for residential developments that would normally be done leasehold and ensure transparency from the start. As a further measure, current leasehold developments that were established with less than 100-year leases should be converted to commonhold at the freeholder’s expense.
As a parent watching my son battling to get on the housing ladder it’s been a real eye opener looking through some of the leasehold agreements around – legalised extortion in some cases. When he asks me why house buyers are being exploited in this way I find it difficult to come up with any rational answer other than greed.
Maybe this exploitation of leaseholders will become the next PPI.