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Slam the door shut on ugly abuse of property leaseholds – Whitehouse

by: Phil Whitehouse, managing director, MCI Mortgage Club
  • 15/08/2018
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Slam the door shut on ugly abuse of property leaseholds – Whitehouse
There has been a dramatic shift amongst developers towards leasehold sales in recent years, following the explosion in high-rise apartment construction across Britain’s major urban areas and the upturn in levels of consumer demand.


The system means property owners must lease the land their home stands on for a fixed number of years.

There are currently somewhere in the region of 1.4m leasehold houses and 2.9m flats in England, according to government estimates, a figure that equates to almost one in five national properties.

Incidences of ground rent clauses doubling every ten years, or freeholds being sold on to third party companies and subsequently offered to owners at prices running into tens of thousands of pounds, are increasingly prevalent, especially in the North West of England where just over 80% of all homes are on a leasehold contract.

In July 2017, the then communities secretary, Sajid Javid, announced a consultation designed to curb and reform this spiralling abuse of leaseholds within the property market.

Proposals included a complete ban on the sale of houses as leasehold, which subsequently came into effect in December last year, as well as reducing ground rent to zero.

In May 2017, the Nationwide building society had announced it would cease lending against any leasehold property where the ground rent exceeded 1% of the total value or with leasehold terms of less than 250 years for houses or 125 for flats, a brave and principled industry benchmark.

Indeed, as the consensus of opinion continues to shift decisively towards the abolition of such flagrant leasehold practices, the Law Commission has announced a prospective package of reform proposals, pending a full consultation paper to be published in September, aimed to make freehold purchases easier and cheaper for leasehold owners and to waive current restrictions requiring two years of ownership before the option becomes available.

Changes in valuation formulas used to calculate freehold fees and the reduction in, or outright removal of, legal cost contributions to landlords are also part of the recommendations, potentially bringing the widespread use of these ‘feudal practices’ to an end and slamming the door shut on an ugly period in British social history.

That it has taken so long for reforms such as these to reach statute is a bigger mystery than that the actual abuses exist at all.

Yet at long last there appears to be a glimmer of hope for those who have suffered for so long at the hands of such unscrupulous elements.

Let’s just hope that the common sense approach adopted by the Law Commission prevails at the consultation level and is passed without compromise; it’s long overdue.

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