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| Sajid Javid promises to liberate leaseholders from 'feudal practices' | Sajid Javid promises to liberate leaseholders from 'feudal practices' |
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| Leaseholders are to be freed from “feudal practices” in the property market, according to the government minister responsible for housing, with new rules to make extending a lease or purchasing a freehold “much easier, faster and cheaper”. | Leaseholders are to be freed from “feudal practices” in the property market, according to the government minister responsible for housing, with new rules to make extending a lease or purchasing a freehold “much easier, faster and cheaper”. |
| Sajid Javid, the communities secretary, also said the government would go ahead with a ban on leaseholds on new-build houses first announced in July, and will force developers to cut controversial ground rents to zero for all new apartments and houses. | Sajid Javid, the communities secretary, also said the government would go ahead with a ban on leaseholds on new-build houses first announced in July, and will force developers to cut controversial ground rents to zero for all new apartments and houses. |
| The government will also write to all developers that have sold homes with “onerous ground rent terms” to ask them to provide “necessary redress”. Taylor Woodrow has set aside £130m to assist leasehold buyers but other developers have steadfastly refused to pay any form of compensation. | The government will also write to all developers that have sold homes with “onerous ground rent terms” to ask them to provide “necessary redress”. Taylor Woodrow has set aside £130m to assist leasehold buyers but other developers have steadfastly refused to pay any form of compensation. |
| Javid said: “It’s unacceptable for homebuyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms. It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices.” | Javid said: “It’s unacceptable for homebuyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms. It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices.” |
| Britain has had leasehold homes for hundreds of years, but only in the past few months has the ground rent scandal exploded. Now the government is proposing a complete ban on new houses sold as leasehold, and reducing ground rents to zero. Traditionally, houses have been sold as freehold, and the buyer has complete control over their property. When a house is sold as leasehold, the buyer is effectively only a tenant with a very long term rental, with the ground the home is built on remaining in the hands of the freeholder. The home buyer has to pay an annual “ground rent” to the freeholder, and has to ask the freeholder for consent if they want to make any changes to the property, such as building a conservatory or changing the windows. | Britain has had leasehold homes for hundreds of years, but only in the past few months has the ground rent scandal exploded. Now the government is proposing a complete ban on new houses sold as leasehold, and reducing ground rents to zero. Traditionally, houses have been sold as freehold, and the buyer has complete control over their property. When a house is sold as leasehold, the buyer is effectively only a tenant with a very long term rental, with the ground the home is built on remaining in the hands of the freeholder. The home buyer has to pay an annual “ground rent” to the freeholder, and has to ask the freeholder for consent if they want to make any changes to the property, such as building a conservatory or changing the windows. |
| In the past, leasehold property owners were generally charged just a “peppercorn” ground rent, sometimes as little as £1 a year, and many freeholders did not bother to collect it. But the picture changed earlier this century, when developers started to insert clauses into leasehold contracts where the ground rent was set at £200-£400 a year, doubling every ten years. Direct Line estimates the typical ground rent to be currently £371. Although unsuspecting first-time buyers were frequently told that 999-year leases were “virtually freehold”, the clauses meant that the ground rent would soon spiral to absurd levels. The government quotes a family house where the ground rent is expected to hit £10,000 a year by 2060. | In the past, leasehold property owners were generally charged just a “peppercorn” ground rent, sometimes as little as £1 a year, and many freeholders did not bother to collect it. But the picture changed earlier this century, when developers started to insert clauses into leasehold contracts where the ground rent was set at £200-£400 a year, doubling every ten years. Direct Line estimates the typical ground rent to be currently £371. Although unsuspecting first-time buyers were frequently told that 999-year leases were “virtually freehold”, the clauses meant that the ground rent would soon spiral to absurd levels. The government quotes a family house where the ground rent is expected to hit £10,000 a year by 2060. |
| The Leasehold Knowledge Partnership, which has vigorously campaigned on this issue, estimates that around 100,000 homebuyers are trapped in contracts with spiralling ground rents. There are many more people in leasehold flats, some of which also have doubling ground rents. | The Leasehold Knowledge Partnership, which has vigorously campaigned on this issue, estimates that around 100,000 homebuyers are trapped in contracts with spiralling ground rents. There are many more people in leasehold flats, some of which also have doubling ground rents. |
| No. Freeholders are able to extract other sums out of their leaseholders in a variety of ways. Homebuyers report being charged £100 even to have a letter answered by the freeholder, and as much as £2,500 for permission to build a conservatory. These are charges that are on top of obtaining planning permission. | No. Freeholders are able to extract other sums out of their leaseholders in a variety of ways. Homebuyers report being charged £100 even to have a letter answered by the freeholder, and as much as £2,500 for permission to build a conservatory. These are charges that are on top of obtaining planning permission. |
| The Department for Communities and Local Government said it will be “working with the Law Commission to make the process of purchasing a freehold or extending a lease much easier, faster and cheaper”. | The Department for Communities and Local Government said it will be “working with the Law Commission to make the process of purchasing a freehold or extending a lease much easier, faster and cheaper”. |
| Property experts immediately predicted that some leaseholders could save nearly 50% on the punitive sums many are forced to pay once a flat’s lease drops below 60 years. | Property experts immediately predicted that some leaseholders could save nearly 50% on the punitive sums many are forced to pay once a flat’s lease drops below 60 years. |
| In one example, a £200,000 flat with 50 years left on the lease would be charged around £36,000 to extend under the current system but only £20,000 under a new approach the DCLG is understood to be considering. | In one example, a £200,000 flat with 50 years left on the lease would be charged around £36,000 to extend under the current system but only £20,000 under a new approach the DCLG is understood to be considering. |
| There are 4.2m residential leasehold homes in England in the private sector – one in five of all properties – and of these 1.4m are leasehold houses. Numbers have jumped sharply in recent years because of the explosion of apartment building in cities, and developers who have profited from selling houses as leasehold. Scotland has largely abolished the leasehold system. | There are 4.2m residential leasehold homes in England in the private sector – one in five of all properties – and of these 1.4m are leasehold houses. Numbers have jumped sharply in recent years because of the explosion of apartment building in cities, and developers who have profited from selling houses as leasehold. Scotland has largely abolished the leasehold system. |
| It is understood that Gavin Barwell, a former housing minister but now chief of staff to Theresa May, has been the driving force behind the reforms, enabling Javid to push through laws that will hit many wealthy freeholders. | It is understood that Gavin Barwell, a former housing minister but now chief of staff to Theresa May, has been the driving force behind the reforms, enabling Javid to push through laws that will hit many wealthy freeholders. |
| Campaigners welcomed the reforms but remain concerned about when they will come into force. Sebastian O’Kelly of Leasehold Knowledge Partnership called it “a huge vindication of our efforts”. | Campaigners welcomed the reforms but remain concerned about when they will come into force. Sebastian O’Kelly of Leasehold Knowledge Partnership called it “a huge vindication of our efforts”. |
| However, O’Kelly warned: “There is plenty of wriggle room here as the issue is referred to the Law Commission, where doubtless the sector and its grisly trade bodies will have their baleful influence.” | However, O’Kelly warned: “There is plenty of wriggle room here as the issue is referred to the Law Commission, where doubtless the sector and its grisly trade bodies will have their baleful influence.” |
| But government officials promised that the new rules, including a new formula for calculating leasehold buyouts, will be in place by the end of 2018. | But government officials promised that the new rules, including a new formula for calculating leasehold buyouts, will be in place by the end of 2018. |
| James Wyatt of Parthenia Valuations, whose model for valuing leases is among those being studied by the DCLG, said reform will end the £500m a year “gravy train” of excess fees and charges earned by freeholders, solicitors and surveyors. | James Wyatt of Parthenia Valuations, whose model for valuing leases is among those being studied by the DCLG, said reform will end the £500m a year “gravy train” of excess fees and charges earned by freeholders, solicitors and surveyors. |
| Leaseholders should be given easy ready-reckoners for buying out freeholds, said Sir Peter Bottomley, Conservative MP for Worthing, sweeping away the jargon of leasehold enfranchisement, such as “hedonic regression”, “relativity” and “marriage value”. | Leaseholders should be given easy ready-reckoners for buying out freeholds, said Sir Peter Bottomley, Conservative MP for Worthing, sweeping away the jargon of leasehold enfranchisement, such as “hedonic regression”, “relativity” and “marriage value”. |
| “The calculations should be simple and cost-free and neither side ought to have disputes.” | “The calculations should be simple and cost-free and neither side ought to have disputes.” |
| Bottomley is a leading member of an all-party parliamentary group that has brought Labour and Conservative MPs together to fight leasehold abuses, such as the ground rent scandal that has engulfed homeowners, particularly in the north-west of England. | Bottomley is a leading member of an all-party parliamentary group that has brought Labour and Conservative MPs together to fight leasehold abuses, such as the ground rent scandal that has engulfed homeowners, particularly in the north-west of England. |
| Many homebuyers found that after buying new-build homes on 999 year leases sold as “almost the same as freehold” they were trapped in spiralling ground rents, doubling every 10 years, with the freehold sold on to specialist companies demanding huge sums if the homeowner wanted to buy their way out. | Many homebuyers found that after buying new-build homes on 999 year leases sold as “almost the same as freehold” they were trapped in spiralling ground rents, doubling every 10 years, with the freehold sold on to specialist companies demanding huge sums if the homeowner wanted to buy their way out. |
| In extreme cases, homeowners have been left with homes made virtually worthless as banks will no longer lend against them. | In extreme cases, homeowners have been left with homes made virtually worthless as banks will no longer lend against them. |
| Justin Madders, the Labour MP whose constituency of Ellesmere Port and Neston is a hotbed of leasehold issues, said: “There is still a risk that the government could kick this into the long grass leaving thousands of people still trapped in unsellable homes. | Justin Madders, the Labour MP whose constituency of Ellesmere Port and Neston is a hotbed of leasehold issues, said: “There is still a risk that the government could kick this into the long grass leaving thousands of people still trapped in unsellable homes. |
| “Urgent action is needed now for those with doubling ground rents and unfair fees and charges in their existing leases and I will be seeking a meeting with the housing minister to set out in detail the straightforward process for purchasing the freehold that I have proposed.” | “Urgent action is needed now for those with doubling ground rents and unfair fees and charges in their existing leases and I will be seeking a meeting with the housing minister to set out in detail the straightforward process for purchasing the freehold that I have proposed.” |