Paul Lewis, the influential BBC R4 presenter of MoneyBox, has attacked the Law Commission’s timid report into reforming the enfranchisement racket.
“Once a leaseholder has paid for the right to live for 99 years in 100 cubic metres of air encased in concrete they soon realise it is a milking parlour …” is Mr Lewis’s reasonable throat-clearing opener.
Residential freeholds have been sold on to anonymous hedge funds in offshore jurisdictions and “these wealthy landlords and their £1,000 an hour lawyers” have made enfranchisement – extending leases and buying the freeholds – as expensive and complicated as possible.
The Law Commission began boldly, with talk of helping leaseholders and making enfranchisement easier, quicker and cheaper (later replaced with “more cost-effective”, whatever that means).
And then, in the final report, came heavy and repeated emphasis on the freehold owners’ human rights to get just compensation for their loss (of something that probably should not have been created in the first place).
Mr Lewis writes:
“Article 1 of the Protocol to the Convention [on human rights] says every “person is entitled to the peaceful enjoyment of his possessions”. And taking the freehold without compensation would deprive the freeholder of that right. However, the full sentence reads: “Every natural or legal person is entitled to the peaceful enjoyment of his possessions.
“You and I, reader, are natural persons. Legal persons are those recognised by the law and include a company or other entity that can enter into contracts and sue or be sued. Including hedge funds. These legal persons are not mortal, so the value 99 years hence is worth more to them than to us …”
As well as compo for the lost years of ground rents – the other more lucrative but … ehem … more dubious income streams of residential freehold ownership (loading insurance, fiddling the service charges, fees on sale etc etc) cannot be included – the landlords invented something called “marriage value”.
Most people would accept that a lease with only 20 years on it is of considerable value to the freeholder, to whom it reverts.
Sadly, what the Law Commission did not ask was why on earth was society allowing industrial-scale creation of new leases in the first place – especially when no other jurisdiction organises flats in this way.
Inhuman rights weigh on the leasehold system
What is a human? And what rights do they have? I am not talking about artificial intelligence or robots. I am talking about hedge funds. Are they human and do they have human rights? Leaseholders may by now have guessed that I am discussing the value of a lease when the freeholder extends or sells it.
Marriage value applies if the lease has less than 80 years left to run.
Mr Lewis writes:
“The Law Commission wrote 137,703 words to come up with no clear recommendation on marriage value. It was clear that leaseholders must pay compensation for lost ground rents. It also said leaseholders must pay for the lost value of the flat because hedge funds have human rights. On marriage value it said — erm, well it could be scrapped. Or kept as it is. Or renamed “hope value” which no one will understand either, but would be only about half the marriage value.
“One of the other three Law Commission reports on leasehold due out this year will look at alternatives to this Domesday system [meaning commonhold]. That won’t help the feudal vassals already trapped at their landlord’s pleasure in a property which falls in value every year. Only scrapping it, as they did in Scotland in 2015, will restore human rights to humans. After 1,000 years that would be real help for millennials.”
Paul Lewis presents ‘Money Box’ on BBC Radio 4, on air just after 12 noon on Saturdays, and has been a freelance financial journalist since 1987. Twitter: @paullewismoney
Related posts:
If you want to reform enfranchisement push government hard, is message of Law Commission
APPG recognises efforts of Law Commission to improve enfranchisement
Marriage value a bogus profit in the £2.5bn enfranchisement racket, LKP trustee Dean Buckner tells BBC
Law Commission meets leaseholders in Manchester
Are hedge funds behind Long Harbour, asks Tory MP
JB Leitch loaded leasehold ground rent debt by 222%, Justin Madders tells Commons
Brilliant, forensic analysis of the entire leasing/ground rent scandal by Paul Lewis. The fact that the legal profession derives such a massive income (vested interests with a vengeance?) from the systematic exploitation of leaseholders hardly inspires faith in the Law Commission’s objectivity.
I have huge admiration for the efforts of Sir Peter and his colleagues to reform this antiquated, unjust system, but I suspect that only a major public mobilisation of the country’s leaseholders will make any real impact.
I was invited by the Law Commissioner to attend a meeting in Portcullis House in January 2016. Most who attended were from the building industry. I was one of two owners of retirement apartments. It was obvious to me that they were on the side of the people making money out of us. The main speaker was Esther Rantzen talking about a better deal for older people, unfortunately, she works for a retirement company so there was a conflict of interest the other speaker was Baroness Greengross who was hand in glove with an executive of McCarthy & Stone. Time for a shakeup, The Law Commission is not working in the interest of the people who live in Retirement property
It seems that the meeting was in fact business as usual for the freeholder rather than useful to us “renters of space”. (as I tend to think of leasehold)
The main speaker is certainly an older person and that’s who she had in mind for any better deal that was to be had.
Having chaired a leasehold residents association for ten years plus I can attest to the fact that solidarity and action are most desirable in reforming the regrettably archaic english leasehold system. Most important of all however is enlightened self-interest and that seems the hardest to achieve.
Protocol 1, Article 1 of the European Convention on Human Rights clearly states that: “no one shall be deprived of their possessions *except* in the public interest”. The Law Commission blindly read only half of the sentence, stopping short of the word “except”. It is self-evidently in the public interest to deprive of their possessions those private landlords that, 969 days since Grenfell, have done nothing to remove the clear and present danger to the lives of countless thousands of residents.