Help for 1.4 million homeowners trapped in rip-off leasehold homes
The Law Commission has proposed changes that will make it easier for leaseholders to buy the freehold on their houses
RADICAL new proposals for reform will give leasehold homeowners "more control" over their houses, a government watchdog has claimed.
The Law Commission is pushing for changes to make it easier for leaseholders to by the freehold of their property from landlords.
The government estimates that there are four million leasehold homes in the UK and 1.4million of them are houses, while the majority of them are flats.
Leasehold ownership is often described as owning the house but not the land that it's on but really it means that the buyer owns a property for a fixed number of years on a lease from a landlord (the freeholder).
But even though leaseholders have the right to buy the freehold, the current process - called enfranchisement - has been slammed by campaigners as being costly, complicated and in favour of landlords.
The proposals include simplifying the buying process so that it contains "fewer traps" for leaseholders.
What if I want to buy a leasehold, what should I look out for?
ANDREW Johnson, money expert at Money Advice Service has some tips on what to consider before buying a leasehold.
- Check how many years are left on the lease? You may struggle to get a mortgage on a leasehold property which has less than 70 years to run. A short lease will be a lot more expensive to extend.
- Ask about the cost of extending your lease now if this might be an issue in the future. You don’t want anything that could impact your properties saleability in the future.
- Ask how much the ground rent is? This may be a relatively small amount now but beware escalating ground rents which have seen substantial figures payable at the end of the term of the lease. This could negatively impact your ability to sell your property in the future.
- Ask about service charges and other related costs? This generally covers repairs or maintenance to the property including buildings insurance. This can be several hundred or several thousands pounds, so consider how you will budget for these costs and the impact of any future increases.
As it stands, leaseholders must have owned their own home for two years before trying to by the freehold but this rule would be abandoned under the new proposals.
They also aim to make the process cheaper too by adjusting the "valuation formula" so that it's cheaper too, without pushing too much of the cost on to the landlords.
When a lease comes to an end, homeowners are often left forking out extortionate fees to purchase a one off 50 year extension but the watchdog advises that these top ups should last up to 250 years.
The new proposals are part of the Law Commission's review into existing leaseholders of houses.
A similar publication specifically about leaseholders of flats is expected later this year, but until if or when the proposals are passed into law leaseholds will have to continue paying the charges.
Law Commissioner Professor Nick Hopkins said: "Enfranchisement offers a route out of leasehold but the law is failing homeowners. It's complex and expensive, and leads to unnecessary conflict, costs and delay.
"We've heard of untold stress caused to homeowners who have had to put their lives on hold because of issues with their leases.
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"Clearly, that’s not right, and our solutions for leasehold houses will provide a better deal for leaseholders and make sure that the law works in the best interests of house owners.";
In December 2017 the government introduced new measures to try and stop freeholders taking advantage of their leaseholders, but these measures aren't law yet.
In the meantime, some homeowners are being fork out on the controversial fees, which can cost anything between a few to thousands of pounds every years.
Consumer group Which? claims that thousands of these homeowners are now "trapped" in homes they can't sell because of the spiralling ground rent and fees.
Homeowners told the consumer site about how they were stuck paying extortionate ground rents and fees to freeholders if they want to make changes to their properties.
Why is there a campaign to end leaseholds?
SEBASTIAN O'Kelly is a trustee on the Leasehold Knowledge Partnership . The LKP is a charity that campaigns for reform on leaseholds and gives help to anyone suffering under unfair treatment by their freeholder.
Leasehold just means long-term tenancy and you will be treated in law just a like a tenant: you do not own the land of the building; you do not own the building or any part of it; you own time to occupy a part of it.
It is marketing nonsense to sell leasehold homes, whether houses or flats, as "virtual freeholds" or even "home ownership".
No one would describe a 10-year lease as home ownership, and you shouldn't describe a 999-year lease as one either.
It is an utter scandal that housebuilders have sold leasehold houses around the country: it just means that they are creating an income stream in the freehold which they then flog off to dodgy anonymous entitities, often based offshore.
Government is ending them. Good.
Leasehold has more justification for flats, but the rest of the world outside England and Wales does not sell flats as tenancies.
The rest of the world sells them as real home ownership, where you own a bit of the land, a bit of the corridors and lift shaft and roof – and have to pay for them with your neighbours.
You have to agree to maintain the place with others.
But at least there is not a third party parasite paying his private school fees by thinking up ways of over-charging the residents.
The Leasehold Knowledge Partnership wants to end leasehold and bring in real home ownership in flats with commonhold.
It exists on the statute book but has never seriously been adopted because developers make so much money flogging freeholds with their ground rents to dubious speculators.
You can find the Leasehold Knowledge Partnership
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