An application for a backbench debate on leasehold issues is due to be heard on Tuesday 21st November 2017
The application asks the committee to consider:
The APPG on leasehold and commonhold reform continues to grow and to date has 127 members. Government recently issued both a consultation and a call for evidence on leasehold properties and estimated that there were around 4 million private leasehold dwellings in England in 2014-15 but their analysis only covers the private sector, social housing is not included in the figure – the APPG believes the actual number to be much higher. Access to the number of leasehold houses, flats and apartments sold each year with doubling ground rents in England and Wales since 2005 is of great concern as is the costs of lease extensions and enfranchisement valuations. Additional, but not exhaustive areas of concern include the opportunities for exploitation in the leasehold sector particularly against the more vulnerable and elderly; current cost imbalance at the leasehold property Tribunal; leasehold insurance and service charge funds which currently fall outside the regulatory framework; leasehold advisory services and other organisations including managing agents and how these best serve leaseholders; the proper implementation of Commonhold so it works as parliament intended.
In addition to the co Chairs Sir Peter Bottomley, Sir Ed Davay and Jim Fitzpatrick the following MPs have supported the application and agreed to take part in the debate:
Kelly Tolhurst, Rushanara Ali, Andrew Selous, Justin Madders, Will Quince, Ian Austin, Ronnie Campbell, Ruth George, Justin Tomlinson, Angela Smith, David Hanson, Kevan Jones, Ruth Cadbury, Mary Glindon, David Hanson, Marie Rimmer, David Lammy, Nigel Evans, Fiona Bruce, Rosie Cooper, Stephen Doughty, Helen Hayes, Mark Menzies, Helen Grant, Dan Carden, Catherine McKinnell, Chris Williamson, George Howath, Derek Twigg, Julie Elliot
This backbench debate adds to the 10-minute rule bill submitted by Justin Madders which is due for its 2nd reading on the 2nd Feb 2018
https://services.parliament.uk/bills/2017-19/leaseholdreform.html
Leasehold houses have been sold for more than freehold ones, reports Telegraph
My message to Members of Parliament.
As you know the Palace of Westminster is in urgent need of repair, which is going to cost a very significant amount of money, that will be taxpayer funded.
Now just for a moment, imagine that you as Members of Parliament were to be held liable for the cost of repairs? You had no effective control over the management of Parliament. You had no effective control over the scope or costs of the works. Even worse, the managing agent that is responsible for the maintenance of Parliament is connected to the “owner ” of Parliament and has a vested interest in increasing income by “enhancing” repair costs.
“Absolutely ridiculous” I hear you all cry! “We don’t own the Palace Of Westminster. We are only here for a set period of time”
And that my friends, who sit in Parliament is the “Absolutely ridiculous” position leaseholders find themselves in every day of their lives!
Imagine the benefits for the people you represent by banishing the scourge of leasehold?
What a “no cost” to the treasury would be the boost to the economy?
How much better to have funds spent in the local community rather than being transferred out of the country to an off shore non tax paying domain?
All of you, whatever your party allegiance enter politics to help society (though you may disagree with the way to do it?)
How can any of you in all conscience support the current system of leasehold? .
What a brilliant scenario you paint Michael, well done. If they would all actually imagine themselves in that position (our position) it just ‘might’ make a difference but as always with leasehold I won’t be holding my breath!!
What every MP should know :
In Feb 2002 , during debate for enacting Commonhold Legislation, Barry Gardiner MP ( Brent ,N) identified E&M and Simarc as “ground rent grazers” and pointed out their reason for investing was not for the ground rent income but for the “recovery charges “ which can be claimed from tenants in arrears of ground rent of a few pounds. Many leases included the clause stating ground rent is due whether “demanded or not” . So often the ground rent demands were not posted by the agent or the payment cheques were not paid into the bank account within 6 months. This game played against the leaseholder was stopped when new law after 2005 was commenced to require an ground rent to be demanded . E & M moved to new grazing pastures claiming freeholder consent to sublet and global 5 year fees and many cases were brought before the LVT .
In 2004 , Barry Sheerman MP ( Huddersfield) was asking the Housing Minister to investigate E&M and Consensus Business Group ( CBG ) and its Complex Structure based in the British Virgin Isles. In a written reply, Keith Hill then Housing Minister informed that Housing Department had been separated from DETR and had no powers to investigate companies and declined to exercise his powers to act. Many companies including CBG took the Minister’s reply as the green light to go ahead with their investment in ground rent freeholds and continue exploitation of leaseholders .
During 2005-2008, CBG made many acquisitions of ground rent companies including Solitaire , Pembertons and Peverel which were purchased without offering Right of First Refusal (RFR) to leaseholders . CBG found keeping a dormant company costing about £25 per year could skate around the RFR obligations .
In the 2008 UK Bank crisis, the Kaupthing Bank based in Iceland failed and it was reported that the Tchenguiz Brothers had been given excessive loans secured against its UK ground rent portfolio which contributed to the Kaupthing Bank’s collapse. The Kaupthing Bank (UK Branch) had offered higher interest on deposits and attracted many UK clients and Local Councils. The depositors had to be compensated under the UK Bank Guarantee scheme and the press reported about £3 Bil was paid out by the UK Treasury . The next Icelandic Government after the Banking collapse , refused to re-imburse the UK Treasury for compensation payments paid to depositors .
So looking back, the 2004 decision by Keith Hill not to investigate CBG has costed the UK Government atleast £3 Bil in compensation paid in 2009 under the UK Bank deposit guarantee scheme ) . The “ground rent grazing” reported by Barry Gardiner in 2002 had carried CBG to move up the finance level and focus on “bank loan grazing” using higher valuation of ground rent income by actuarial valuation method .
This valuation method is reported in the company accounts filed at Companies House by Proxima GR Properties Ltd and more recently by Beta Centauri Ltd which claims asset valuation of £2.5 Bil from only £12.7 Mil rental income and has bank loans of £650 Mil. The typical yield from residential property is around 3.4 % so valuation is about 30 times rent and rental income of £12.7 Mil gives a property valuation around £390 Mil and NOT £2.5 Bil.
Does this “bank loan grazing” based on actuarial valuation of “ground rent income” allowed by our Government and at same time imposing the leasehold title property system on 4-6 million leaseholders to facilitate “bank loan grazing” make financial sense or a danger to our economy ?
We can all understand “hacked software” and why it has to be stopped but does anyone in Government really understand “the leasehold property system and its financing structure ” is no really different to “hacked software”. These are financial suicide agreements for 5-10 generations of leaseholders to transfer their lifetime savings to a freeholder company which can escape paying corporation tax .
When a developer sells property under Freehold or Commonhold title , the buyer get legal ownership of the property and this is part of the saved wealth of the people to hand down to the next generation .
When a developer sells property under leasehold title, the buyer gets a long term rental contract which ultimately the premium paid for the lease falls to Nil Value when the property returns to the Lessor.
There is no saved wealth to hand down to next generation because the wealth has been scammed under the leasehold system and transferred to off-shore companies – really GONE.
Yes and this Keith Hill was the same Keith Hill who became ARMA regulator and was just as useless!! Should be brought to account for all the misery suffered by leaseholders!!
Yes , Many of the Housing Ministers are appointed because they support the PM but they don’t stay long enough in the post to understand the job in depth and make independent decisions to make improvement to the daily lives of working people.
I remember Nigel Wilkins ( CARL ) complaining the Government had neutered its own Commonhold Legislation by insisting all of the leaseholders plus the freeholder had to agree on the Transfer from Leasehold system to Commonhold. system, which makes it impossible. I guess Keith Hill was the one of the backers to block the change to Commonhold system.
He should brought to account and explain why the New Labour Government Cabinet in 2004 decided to block the transfer to Commonhold system .
Do the Backbench Committee Members come from previous business back grounds ? If so consider the following :
1. The National Debt ( Government debt ) has risen from around £500 Billion before 2008 Financial crisis to £1700 Billion in 2017 . This debt is a burden on the shoulders of the tax payer due to Government Ministers in power making the wrong decisions or by MISMANAGEMENT – I have seen figures quoted to the extent of £60,000 shared per family ?
2. Developers can construct and sell property under any property title including Freehold Title ( normally houses ) Leasehold title ( normally flats in apartment buildings ) and Commonhold Title ( since 2004 but not used by Developers ) . The construction cost is the same for any title so the developer sells for the best price and giving the highest profit in the market..
3. The buyer of property under freehold title gets the legal ownership of the property. A property bought 100 years ago for £1000 may now be worth £200,000 ( average national price ) to the title holder.
4. The buyer of a flat under leasehold title gets a long term rental contract and pays annual service charges . A lease on a property bought 99 years ago by the title holder may be worth Nil due to reaching the expiry of the lease. Taking the longterm view, the leasehold title is a bad investment and the titleholder ( or subsequent holders ) has paid a heavy price for what is a failed investment in the “lease premium”
5 The Commonhold title has never been offered by any of the national builders and very strange No Housing Minister or Civil Servant has made ANY effort since 2004 to check why Commonhold title is not offered by developers. We all assume that selling leasehold flats, the developer can sell the freehold title for extra profit to companies want to receive ground rent income. But it seems the VAT Notice No.708 Clause 4.2 granting of major interest below is worded :
Clause 4.2 Am I granting a major interest in a building?
You are granting a major interest in a building when you sell, assign or surrender:
-the freehold
-in relation to England, Wales and Northern Ireland, a lease for a term certain exceeding 21 years
Conclusion – It seems the HMRC VAT team have never heard of Commonhold Title ???
6. Assuming 4 million leasehold units in England and Wales, the total sum invested in the premium to buy the leases must be 4 million units x £200,0000 ( average ) =£800 Billion which is the sum tied up in leases and this investment of asset is reduced to NIL Value at expiry of lease.
This Financial Loss does not occur if the property were sold under Freehold or Commonhold title.
7. If you understand the National Debt standing at £1700 Billion is a huge burden on every UK Household , then you will understand the burden of £800 Billion on the 4 Million households ( buyers of “leasehold property” ) in England and Wales .
Only England and Wales keeps Leaseholders in chains to an obsolete property system and its totally unnecessary because the rest of the world uses Commonhold.
Comparison of Taxes ( Previous Housing Minister & Civil Servants claims it is a fair balance )
1. Leaseholders pay tax at 20% and 40% and 45% :on earnings
2. Freeholder Companies pay tax at 19% on profit after deduction of loan interest .
Comparison of Lease Contracting Parties
1. Leaseholder is given a 125 years lease and typically pays £250 p.a ground rent doubling after every 25 years & now some are doubling 10 years. and annual service charge plus contribution to building insurance policy.
.
2. Lessor is usually the Developer ( legal owner of building ) and sells freehold title to Freeholder Investment Company after 2 years from completion at site in order to reclaim VAT paid during construction to suppliers and builders merchants
Comparison of Financing to Purchase interest in the Building :
1. Leaseholder puts down 25 % of £200,000 ( typical sale price ) and finances balance by Mortgage loan to be repaid over 25 years..
2. Freeholder Company buys freehold title for block , paying approx £4000 per flat in block (=2% ) , puts down 30%deposit = £1200 and takes interest only bank loan to cover the balance.
Comparison of Investment 🙁 Housing Minister and Civil Servants claims it is a fair balance.).
1. Leaseholders ( may be several ) paying deposits and a series of mortgage loans so perhaps the starting price at £200,000 is paid 2-3 times over before reaching end of the lease. Lets say £600,000 may be paid over the years and it becomes a totally loss when the building reverts to freeholder.
2. Freeholder Company has paid £1,200 per unit in the block, as deposit to purchase freehold title and receives annual ground rent £250 to pay the interest on £2800 loan. The Managing Agent will try to get additional income by charging for subletting consent and extracting commissions for placing buildings insurance and charging fees for solicitor sale enquiries and registration of mortgage charges etc . Also some freeholder companies charge extortionate fees for statutory lease extension often netting £20,000 or more. Some make extortionate charges for lease extensions back to 99 years lease but often not much less than a 90 years lease.
In retirement homes sites , sale of flat by executor may cost 10 % transfer fee and sublet fees are charged whilst for flat rented out whilst waiting waiting for a buyer.
Comparison of debt due to using leasehold title :
4 Million Leaseholders = £ 800 Billion
4 Million Commonholders = Nil.
4 Million Freeholders = Nil
4 Million Tax Payers @ £5K income Tax = £20,000 Million annual tax revenue due to Government
The Government should put the interests of the leaseholders BEFORE the interests of the freehold companies.
Lets ask the Chancellor to bring a level play field starting in the next tax year by :
1, HMRC to terminate deduction of “bank loan interest” from ground rent income as an allowable expense. ( This is already applies to BTL private landlords.).
2. All “annual ground rent income” shall be taxed as trust income at 40% tax rate and 20% council tax .
3. All banks shall withdraw lending facility against residential ground rent income in England & Wales because freehold titles may only be sold to the leaseholders in the block. Scotland and N Ireland already stopped ground rent collection.
4. Housing Minister to terminate “forfeiture proceedings” and direct freeholders to use the small claims Court.
5 Housing Minister to direct Developers to offer Leasehold property on 999 year lease at peppercorn ground rent .
6 Suitable Regulator to apply “Strict Regulation to Managing Agents” and have Authority to disqualify trading as a Managing Agent for any type of mis-conduct including oral harrasment and obstruction to legitimate enquiries or deliberate concealment of discrepances. or claiming commission from placing building insurance or falsified expenses .for charging of service charge money.
Dear Ollie
I cannot disagree with any of your five proposals. However I should have liked you to include a sixth proposal EG the introduction of STRICT REGULATION OF MANAGING AGENTS.
It is imperative that rogue Agents ( The many NOT the few) are expunged from the Residential property so called “ Profession”.
Theyband their “ gangster” tactics have caused serious distress to individual leaseholders and sometimes communities as a whole. This must not be allowed to continue.
I am currently being sued for “ Defamation “ and “ Harassment “ for doing no more than stating FACTS and requesting information. I was even accused by an Insurance brokers of Harassment for “ daring”;to querie discrepancies in the building Insurance schedule. He said he would phone the police????? I told him to stick his head where the sun don’t shine.
This is clearly the new tactic adopted by the aforementioned “Industry”…… Scream “ HARASSMENT” in an attempt to prevent leaseholders looking for the truth.
We must not let these rogue operators get away with their nefarious, bullying and venal practices.
Yes I can add proposal No. 6 .but it may be regulated under Another Authority ??
I recommend you report the broker to the Financial Conduct Authority for harassment to cover up what may be suspected fraud .
Dear Ollie.
Thanks for that. It had crossed mind. I believe there to be collusion between the Managing Agent co and the Brokers.
Kim states
I am currently being sued for “ Defamation “ and “ Harassment “ for doing no more than stating FACTS and requesting information. I was even accused by an Insurance brokers of Harassment for “ daring”;to querie discrepancies in the building Insurance schedule. He said he would phone the police????? I told him to stick his head where the sun don’t shine.
Really? I cant believe someone would sue for defamation without basis. They risk having to pay all your costs if they lose. Do they not have a different version to the so called “facts “? surely it cannot be as clear cut as you present it. Perhaps you would like to share with us what they are claiming you have done ? If they have issued proceedings they would detail exactly what you have done and not just use the words “defamation ” and “harassment ” . They would have to be very specific.
Dear Interested.
Facts are Facts and if I am forced to insruct lawyers the will ask that the Judge obliges the Claimaint to sign a sworn affidavit.
Forgive me but I do not wish to respond further.
We look forward in anticipation as to what happens. From the neutral bystander there is got to be more to this then what you are telling us. They would have removed the case by now, as if they have no chance of winning case they stand to lose serious costs and reputation.
Time will tell.
Keep us posted.
A brief guide to “Defamation”
It is something that is Published,, False, Injurious,Unprivileged,
So to prove Defamation the aggrieved party would have to show that these requirements had been met.
As an example, let me mention Firstport (don’t panic Mr Editor, I know how far I can go!)
Suppose I said “In my opinion they must be the worst property management company in the UK?” That is opinion, whether factually correct or not. I am entitled to an opinion.
Suppose I said Firstport had been found guilty of price fixing at 100 retirement developments?
That is not correct, they were found guilty of price fixing at 65 retirement developments, not 100. But that also would not be defamation, as stating the wrong number of retirement developments they price fixed is not injurious to their reputation.
Suppose I said that” Firstport use the threat of legal action to silence their critics or prevent the truth being exposed, and that frequently they try to settle cases immediately before walking into the court or withdraw days before the case?”
As long as I can show just cause to believe what I am saying is truthful that is not defamation.
Without knowing the details, I strongly suspect that this is the situation facing Kim.
Master Epstein
An excellent summation In my view.
and you assume that the lawyers issuing proceedings against Kim are not aware of the definitions ?
I am eager to see what happens as I believe there is more to this story which is not being told here.
Master Epstein
Do you recall Johnathan Aitken with his “ Sword of truth” and “ Shield of Honour” ? Or it could have been his sword of honour and shield of yadda yadda.
I recall that he had to admit to attempting to pervert the course of Justice by drafting a witness statement for his daughter in which she backed up his version of events EG “ Lies”.
I believe the Judge stated that Aitken had woven a web of deceit in which he had entangled himself and from which there was no way out unless he was prepared to come clean and tell the truth. Unfortunately for hi. he didn’t and was sentenced to 4 years imprisonment and served 18 months.
Perjury is a serious business.., I could wax lyrical about Jeffery Archer bit can’t be bothered.
In my post dated Nov 21 ,
I have called for a level playing field and put up 6 proposals to lower the market price of the freehold title by taking away the tax office props and bank loans which altogeher hold up the market price.
Any more suggestions ?
Ollie .
Ha ha ha ha ha!!!! To nobody in paticular.
The Members attending the Backbench Business Committee Meeting should be reading our posted comments and pitching the right questions to Philip Hammond on 22nd Nov 2017. and the key points are ” level playing field and playing cricket “.
Lets see if Philip is a “Chancellor of the People” and bring back legal freehold ownership to the people who deceived into buying leasehold title and pay a 98% upfront deposit plus a lifetime of annual ground rents and maintenance charges on landlord’s property and certain eviction at the end of the lease :
– removal of loan interest as allowable expense against ground rent income
– taxing of ground rent income at 40% tax rate and 20% council tax.
– HMRC to apply 20% VAT on new leasehold property if ground rent is demanded in lease.
Ollie I believe that the Chancellor should prevent companies purchasing Freehold companies in order to bypass tenants rights.
This happens often as the cognoscenti contributors to this site are aware.
It is a technical, unscrupulous, but legal shafting of leaseholders and must not be allowed to continue.
I ask that you please include in your proposal list.
Your phrase ” legal shafting of leaseholders” gives me the super idea . .
Let us propose “shafting the freehold company” and restrict appointment of company directors to leaseholders .in the block
Second solution is to abolish the 2 year waiting period prior to commencing statutory lease extension and to abolish marriage value entirely.
Sign me up to those proposals please.
We shall soon have the “ Ten Commandments” of Residential Property!
And we must stand together and fight to get them implemented.
Admin ,LKP or Michael Epstein
Can you post comment on BBC News website ( about todays Budget ) on our proposal for Chancellor to deliver a level playing field on leasehold reform :
– removal of loan interest as allowable expense against ground rent income received by freeholder
( this already applies to BTL property under privte wnership
– taxing of all ground rent income at 40% tax rate and 20% council tax.
– HMRC to apply 20% VAT on new leasehold property if any ground rent is demanded in lease.
– leaseholders given automatic right to become directors of the freehold company owning the freehold title for their block,
sorry about spelling – correction below .
____________BTL property under private ownership.
Kim and Interested,
Because this is LKP I will leave out individual names, save to mention Firstport and our friends JB Leitch.
So this involved a serving soldier(on active service) who disputed a service charge levied by Firstport on land adjoining his property.
In essence his case was that Firstport had refused to show any evidence that they had a contract in place to manage the land and thereby collect a service charge.
Firstport for their part argued that they did have a management contractor with the freeholder but could not divulge it due to “commercial sensitivity” Various threats were made.to the soldier and charges were added to his account. In due course J.B Leitch were involved who added greatly to the costs with a threat of further costs if the soldier did not immediately settle.
A senior member of Firstport staff contacted the soldier and professed himself as “being at a loss.to understand the issues the soldier had” but if he would kindly pay up the money owens, they in the interests of maintaining a good relationship would drop the court case. the soldier refused.
So it went to court. Initially J.B Leitch asked the judge for a decision without the soldier’s evidence being presented as they claimed it was so “specious” it did not warrant a case.
This failed. the soldier was able to outline his case in a pre-trial summary, which J.B leitch attempted to have “struck out” They failed in this as well.
Into court they went.. J.B Leitch presented their case that instructed by the freeholder the soldier owed a sum (I believe in excess of £20,000)
The soldier’s case was simple. Firstport could not have a contract with the freeholder, as the freeholder was a completely different unconnected company, and he was able to prove this and likewise prove that Firstport did not have Locus Standi.
It was a heavy defeat for J.B Leitch and Firstport.
At all times both must have known the soldier was right. they must have known they could not possibly have a management contract (since they didn’t know who the freeholder was?)
It has often been my experience (and of others) that the more aggressive Firstport and J.B Leitch are the weaker their case probably is.
Kim is right to persevere. She will win.
Master Epstein.
I thank you for your comment.
In addition, I honestly believe the Managing Agent “ Claimaint” and their Solicitor were attempting to get a Judgement by default. WHY? Beacause acceptance of service was sent to an address at which I do not reside ( Agent knows this) and I was NOT informed via email that important correspondence had been sent to that address. I have email evidence that the Agent AGREED to direct ALL CORRESPONDENCE via my email address. The Agent in question has carried out this ruse before in 2016 whereby they gave Tribunal in relation to a deed variation, my out of use email address and omitted me from the co/ address of the Brighton based lawyer in question where my fellow shareholders had been included. Fortunately the Tribunal forwarded this information to me several weeks ago when asked , as I was preparing my defence to the Agents vexatious Claim, and I did inform why I required the necessary document. I think they realised that jiggerey pokerey had taken places down were very helpful.
As a result , what could have been an easy agreement between shareholders of the Freehold company turned into a cash cow fest of THOUSANDS of pounds for the Agent and their Brighton based Lawyer .Absolutely shocking.
Christmas is coming and I do not necessarily welcome this disteful occurrence in my life. However, I cannot and will not abide bullying, Intimidation, blatant lies told , venality or downright badness which is what I believe I have experienced from the claimant these last 3 yrs. The truth will out.
The “ Aitken Saga” should be a saluatory lesson to the Agent in this case. They would do well to heed the Judges condemnation of Aitken.
However , ultimately it will be their choice!
You can report that Brighton solicitor to the Solicitors Regulation Authority for investigation if you have proof that they are assisting in fraud.
Dear Ollie
I have repeatedly requested that the Brighton Solicitor make available the correspondence sent to my fellow shareholders EG the solicitor in question wrote to them in January 2016 informing them of the directors proposal for a deed variation. however I was written to in March 2016, the hard copy letter was posted to an address at which I do not reside and was emailed to an out of use email address thereby ensuring I would not be able to consent to the proposal. For a belt and braces effect the agent and solicitor gave the Tribunal my out of use email address. BINGO!
In one fell swoop I was alienated from my fellow shareholders who believed I was against the proposal ( I wasn’t) and thousands of ££££££ was spent needlessly on lawyers fees and the Agents fees who I believe charges between 200-250 per hour excluding vat???? ( The Agent that is)
I have informed the solicitor that I am considering reporting them to the SRA. Something is not right.
Excuse grammatical Inaccuracies but my ole IPad is F#c#d.
Admin,
I misread your report and thought the date of debate was to be held on 21 Nov. But it was only date for application to have a debate. But we would request LKP to raise up the following proposals at that debate for a “level playing field” :
– removal of loan interest as an allowable expense against ground rent income received by freeholder ( this expenses is not allowed to BTL property under private ownership
– taxing of all ground rent income at 40% tax rate and 20% council tax. ( Income tax is charged at 20% and 40% )
– HMRC to apply 20% VAT on new leasehold property if any ground rent is demanded in lease.
– leaseholders given automatic right to become directors of the freehold company owning the freehold title for their block,
– withdraw the laws for starting proceedings for forfeiture of lease for arrears of ground rent and direct the Landlord to claim payment arrears in the Small Claims Court.
– withdraw the 2 years waiting period for new leaseholders to apply for statutory lease extension. Fix the cost of statutory lease extension at 10 x annual ground rent and added to every mortgage loan.
–
Excellent proposals and I hope LKP puts them forward at the debate.
Good start , we need to gather support for leasehold reform and to remove the banks from financing the unscrupulous freehold compan######ies.
Proposer – Sebastian ?
Seconder – Martin ?
Supporters – Ollie, Kim , Michael Epstein ? , Lesley Newham ?
Count me as a supporter.