Fleeced On The Freehold

Up to 1.3 million homeowners could be trapped in freehold contracts that tie them to rising and unregulated fees. Many new-build estate residents who already pay council tax are being charged uncapped 'management fees' if their local authority does not take on the upkeep of the area. Campaigners are calling it 'the new leasehold scandal' and say homeowners are now struggling to sell or remortgage. Read more on Mailonline.

https://www.dailymail.co.uk/money/mortgageshome/article-7601941/Toxic-leaseholds-banned-firms-cashing-freeholds.html

Expand 'Commonhold' Ownership System, Government Urged

The rarely used “commonhold” system of home ownership should be expanded as an alternative to landlord-controlled leaseholds which are increasingly resented, the Law Commission is recommending. In a consultation, the government’s official adviser on law reform is calling for commonhold to become widely available because it permits anyone to own a freehold flat without the threat of a time-limited lease expiring. Commonholders become members of a company that owns and manages the shared areas and structure of a building. There is no landlord. The proposal would primarily benefit flat owners, many of whom are young and climbing the first rungs of the property ladder but still have to pay substantial annual ground rents. Read more on the Guardian website.

https://www.theguardian.com/law/2018/dec/10/plans-expand-commonhold-home-ownership-system-landlords-uk

Leasehold Law Set For Radical Reform

Radical new proposals to provide a fairer deal for leasehold homeowners have been announced by the Law Commission. Following hot on the heels of plans by the Government to ban the sale of houses on a leasehold basis, the independent legal body is outlining a range of measures to help existing leasehold homeowners buy the freehold of their houses. These include:

·         options for changing the valuation formula, having been asked by Government to examine how to reduce the price while providing sufficient compensation to landlords

·         making it easier for homeowners to buy the freehold

·         removing the requirement that leaseholders must have owned their house for two years before making a claim

Read more on the Law Commission website.

https://www.lawcom.gov.uk/leasehold-law-set-for-radical-reform/

Barwell: Government Will Stamp Out 'Abuse' Of Leaseholder System

The government is “determined to stamp out” the “unfair, unjust and unacceptable abuse” of the leaseholder system, according to Gavin Barwell. The housing minister attacked the practice of certain developers building leasehold homes solely as a form of “investment vehicle for financial institutions”. Speaking at the Lease Annual Conference, Mr Barwell said reform of the leaseholder system would be included in the long-awaited Housing White Paper. He cited cases where people buy a leasehold only to find the cost of purchasing the freehold is “too prohibitive”. Read more on Inside Housing.

Housebuilders Must Halt Leasehold Sale Of New Houses

Major housebuilders may be forced to spend millions compensating home buyers locked into unfair leasehold contracts, following a warning by housing minister Gavin Barwell. Barwell has ordered developers to halt future sales of leasehold houses or face government action next year. He also told developers to come up with solutions for householders already stuck in homes where soaring ground rents have made their property virtually unsaleable. Developers have been selling houses as leasehold, with clauses which allow the ground rent to double every 10 years. The freeholds are then sold on to private companies which extract the ground rent, charge high fees if a homeowner wishes to make alterations, and refuse to sell the freehold except for a huge premium. Read more on the Guardian website.

The New-Builds Catching House Buyers In A Leasehold Property Trap

Thousands homebuyers have been trapped by a controversial trend among developers to sell homes as leasehold when they previously would have been freehold. The buyers are given 999-year leases but later find that buying the freehold is prohibitively expensive.  The trap for unsuspecting buyers comes from the escalation in ground rent in the small print of long leases. Initially, it looks affordable. The developer gives the buyer a 999-year lease, with the ground rent set at, say, £295 a year. The contract says the ground rent will double every 10 years. To the company that buys the freehold, the income is valuable. By the time a 28-year-old buyer with a 30-year mortgage comes to the end of their loan term, they will have to pay £2,360 a year in ground rent. And if they don’t pay their home can be seized with no compensation. Read more on the Guardian website.