As for £32,000 for painting flats corridors, they could have been painted in “gold” …
Commons debate, July 11 2019
Investors in the freeholds of ordinary families’ homes knew the political risks of these speculations, Labour’s shadow City minister Jonathan Reynolds told the Commons.
The implication of this is … they can take the consequences as well.
Jonathan Reynolds, Labour MP for Stalybridge and Hyde in Machester, has strong views about the leasehold system which he called “legalised extortion” in the debate in December 2017.
“First, institutional investors—particularly those based in this country—have some of the best research and analytical functions of any businesses going.
“They assess all kinds of risk, including political risk, and I cannot understand how anyone would invest substantially in this area without knowing the political risk that has been raised frequently about the will of Parliament and our desire to see change in this area.
“Secondly, there are many precedents of this House legislating to limit unfair contract terms and conditions because the power balance and the relationship between both parties is not right. I simply cannot emphasise enough how much that applies in this case.
“This is symptomatic of how our housing market does not work anywhere near how it should. I do not think that our land allocation system works. I do not think that the design of new homes works particularly well. I do not think that the power of developers is right in our system.
“I do not think that the affordability of homes is anywhere near correct, and I do not think that this leasehold system is fit for purpose at all.”
Mr Reynolds said that the Commons library data showed that 16 of the top 20 constituencies for leasehold house sales were in the North West, with 14 in Greater Manchester.
“I know how bad this is in my constituency, and my constituency is not even on that list—what must that mean for those other places? The argument that there is some sort of price differential between freehold and leasehold, when the market is so concentrated in certain parts of the country, has nothing going for it whatsoever.”
Mr Reynolds also raised a service charge bill of £32,000 to repaint flat corridors in Hattersley: “frankly, they could be painted with gold”.
Another constituent was charged £180 “just to ask what it would cost to buy the freehold”.
The full debate can be read here
Related posts:
LKP meets shadow housing minister Emma Reynolds
‘I don’t see why houses are sold leasehold,’ says prime minister. Is this the final nail?
Every other major economy has moved away from residential leasehold so why not us, asks shadow housing minister Sarah Jones
Former Labour minister Sally Keeble is new ARMA regulator
‘Our David Wilson Homes leasehold house means we don’t own it, or the land, pay ground rent and consent fees to anonymous speculators in freeholds, often based offshore,’ Cheshire woman tells local paper
Reviewer of building regulations admits post-Grenfell safety regime open to abuse by rogue freeholders
If a lessee has a valuer and solicitor advising them over a 2-3 month period prior to purchase surely it is reasonable to expect the terms that are agreed to be upheld and for appropriate compensation to be awarded if those terms change . Paying a ground rent of say £350 per annum on a flat worth £250k where the rent doubles every 25 years or is linked to the RPi is hardly onerous or unfair and this near hysteria may we’ll be causing lessees who hold such leases currently a great deal of difficulty
Where the solicitor not acted in the interest of the lessee then redress should be sort against the solicitor and don’t necessarily see it should be blocked. Because 6 yrs have elapsed . I am surprised that there has been no discussion about criminal proceedings in such cases
I think you have missed the point Stephen. This is about the imbalance of power. People have little choice but to sign up. The system is unfair and it cannot correct itself. It is entirely appropriate for government to act to sort this out. RPI increases are onerous. Many older leases fix ground rent at a peppercorn or nominal value in perpetuity. This is a relatively recent problem created by speculators who saw an opportunity to dig deep into leaseholder pockets. All investors know their investments can go down as well as up. Freehold investors should not be guaranteed a free ride.
Aside from the small number of 10 year doublers the rest of the ground rent terms are benign – a rent even as high as £350 is hardly so demanding as to blight the sale prospects and if it rises by the RPI it is only reflecting the reasonable demands of so many employees and state pensioners who wish to see their incomes rises in line with inflation
A ground rent terms, as so often said, are for no service and therefore a burden on the property. Therefore it needs to be appraised and considered at the time of purchase – to assist in this regard the NPV of the rent should be shown next to the premium for the flat and SDLT paid on the total – in that way the aggressive rising rents will not have got through as the NPV of the rent would have been so high as to set off alarm bells before the lease was completed
Reducing previously agreed rents could open the floodgates to all sorts of claims
Could mortgagors claim that they were forced to take out large mortgages and demand that the mortgage sum be reduced in the light of falling house prices and rising interest rates
An employer seeks to lower the salary of an employee as profits soar
A landlord increasing rents on an assured shorthold tenancy mid term as costs have unexpectedly risen
Where there has been an abuse of power where the sums inflicted on one party are the result of unfair practices then I can see an argument – but a rent of a few hundred pounds doubling say 20/25 years or inflation is not really the problem – the problems lie in other areas of leasehold management and need to be addressed – further the exercise of powers which override the requirements of human rights to adequate compensation should be reserved for truly exceptional abusive cases – not on ground rents of a few hundred pounds.
Freeholders who add no value, have acquired total control of the building, and the ground rent income, permission fees and lease extension fees from it for as little as 1% of the value of the building.
Leaseholders have paid for all aspects of it. Freeholders who run away when an incident like Grenfell occurs yet claim to be benign long term custodians. Freeholders who fail to insure buildings leaving leaseholders totally exposed. Who’s human rights are being violated Stephen ?
Stephen, your argument about opening the floodgates is specious. You are conflating issues in an attempt to create parallels that do not exist. Escalating ground rents (calculated by any method) are a burden created to sweat the asset (i.e. leaseholders) and secure guaranteed returns by contractual means. Lack of transparency aside, purchasers are powerless to influence the terms they must sign up to because every buyer acts individually at point of purchase. Freeholders would do well to remember that all investments involve a degree of risk including as a result of changing government policy which can affect money markets, business profitability, house prices, etc, etc. The fact that freeholders have been allowed to unfairly exploit our antiquated leasehold system thus far should not give them the right to continue to do so.
Your argument that a ground rent ‘even as high as £350’ will not blight the sale prospects also lacks context. Not withstanding the many readers who will be wishing their ground rent was as low as £350 pa, what really matters now is the relationship between ground rent and property value. So a ground rent of £350 pa on a property worth £200k could indeed blight its sale prospects today. Lenders are slow to move but properties with doubling ground rents are now unmortgageable and some lenders are now beginning to refuse loans where the ground rent exceeds 0.01% of the property value. And with ground rents that escalate by RPI, future increases will be divorced from house prices and many more could find themselves trapped because of a ground rent that lenders will not accept. And by the way, don’t forget that a ground rent of any amount creates the risk of foreclosure, offering a huge bonus for the freeholder if a leaseholder is unfortunate enough to fall into that trap. So, perhaps it is time for you to stop defending the indefensible.
£350 is deemed onnerous by the industry,
Yes NPV is a good idea, but it was not in the contracts signed… hence they are unfair as stated by the MP.
As stated by Clive Betts, developers have been announcing record profits, they can easily afford to compensate customers who (in contrast) are stuck in unsellable properties.
All these points seem very familiar….
Hopefully Stephen is now whistling in the wind, but time will tell.
Either way it’s now tunelessly familiar.
Can’t make a silk purse out of a sow’s ear, no matter how many ears are sacrificed.
Stephen,
Whilst you are the past master of technical reversion rates, you fail to explain as to how it can be that the freeholder business model is so dependent on sky high charges attaching to the ownership of the freehold?
Why should a freeholding company’s accounts contain the warning that ” if legislation is brought forward that makes it easier and cheaper to enfranchise or extend the lease the ability of the business to service loans will be threatened?”
The ground rent is completely unrelated to the value of the property and is indeed for no service – the freeholder selects a figure and the terms and puts that to the purchaser along with the premium he wants. Negotiations then take place with both sides being represented professionally – to later on suggest that it’s all very unfair is a very difficult argument to make as almost without exception most buyers had a professional valuation. What appears to be the issue is that the ground rent terms were not considered in the valuation as those terms may not have been known or yet to be agreed – a failing on the side of the purchaser – not the vendor and redress for this failing should be at the expense of the vendor and those who have subsequently relied on the promises/covenants made in the lease – ie those who bought the freehold subsequently
Again how does a rent of £350 become onerous – if the average first time buyer experience a ONE QUARTER PERCENT increase in their mortgage rate this would exceed £350 . This figure of £350 I would agree is the point at which it starts to impinge on the property value and on a flats worth say £150k may take a few thousand off its value – and logically it should but for lenders to decline lending is staggering – it helps no one – their security is lowered and their mortgagor experiences difficulty selling . In absolute terms it is a near storm in a teacup.
The solution to this problem is for legislation to be brought forward where the lessee can apply to have the rent lowered on payment of a capital sum . It would not require a surveyor to calculate the figure or visit the property – an online calculator with the government setting a discount rate is what is required – a deed of variation lowering the rent only (not altering the term) is again very simple . Plagiarising an idea in Ireland the lessee would make the claim and send the paperwork and the premium for the reduction to the Land Registry who in turn send the finds to the registered owner of the freehold
The other matter that needs to be addressed is the definition of onerous – simply saying £250 or 0.1% is the limit is too simplistic and is causing problems for those who until recently thought they did not have one . The recent limits imposed by lenders is a knee jerk reaction to 10 year doublers . I believe that a ground rent is never onerous IF it’s value is clearly understood when entered into and reflected in the price paid – a high rent should result in a reduction in the flats value but the purchaser will then have a smaller mortgage to help offset the higher rent so what is required is for the valuer to consider the rent and calculate the appropriate reduction off a valuation if that valuation was for a property with a nil rent
Advising the purchaser of the NPV of the rent is what is required
The industry has agreed on that any ground rent in excess of £250 is onnerous.
If you are unhappy about this then don’t invest in freeholds.
I’m beginning to think, Stephen, that you no longer expect anyone here or in government listens to your theories?
Now you claim that ground rent can never be onerous?
As long as it is valued up front?
Interesting concept.
You compare GR to mortgage interest increases.
Where did you study money mathematics? Interest is paid on a loan. A freeholder is not lending any money to a lessee. A freeholder lends nothing bit sells an asset (a lease) at a market premium.
Nor is the subsequent assignee in title lending to the next ‘sucker’ in the chain. After the first sale the freeholder has pocketed the profit and couldn’t care less.
You keep repeating the same theory over and over that a developer discounts the lease asking price to allow for the NPV of the ground rent, when there is NO evidence this ever happens – and in a recent comment you anyway argued that a developer is entitled to maximise their profit and that GR is profit, so why would they ever discount their -in your view – entitlement to a profit?
Even if pigs should ever fly and developers did discount the asking price on a new lease to account for the NPV of the future ground rent, how could anyone test the estimated un-discounted figure? Would that need the prospective buyer to apply to a tribunal or pay a valuer and also pay for and argue with the seller’s?
This is all codology? The housing market simply does not work the way you imply.
Besides, we are where we are with over four million existing long leases in circulation now owned by lessees and not by developers and no discount was ever applied when new. These lessees cannot benefit from the ground rent, so by what argument do you reason that they should be required to discount THEIR sale price to allow for the NPV of the GR?
You can’t make a fair or defensible silk purse out of a bloated old sow’s ear.
Please try another tune, why not, eh?
Paddy
I assume from the condescending tone of your post to me that you are unable to articulate a counter argument to my views. I do not believe I am totally right but I do hold a strong view that ground rent is part of the overall consideration and it would improve the quality of this website if your replies afforded some courtesy and rationale thought rather than rudeness thrown out under the anonymity which this website affords .
It would be reasonable to assume that if a ground rent was £5000 per annum indexed linked every 10 years that a prospective purchaser would sit up and take notice of the size of such a rent . If it could not be negotiated away a reduction of some £150k would be necessary to make the deal work for a purchaser . So I’m large rents it is reasonable to assume that as the rent rises then the premium sort falls.
However as the rent gets smaller buyers and their advisors don’t concentrate on the rent thinking “its only a couple of hundred pounds – so what” and therefore there is no difference in the price paid for a flat with a peppercorn or one with a rent of a few hundred pounds . That situation has arisen due to purchasers and their advisors not thinking it through. Knowing this some unscrupulous developers have exploited that and put in 10 year doubles. Leaving aside the 10 year doublers I do my see it equitable that if a rent of £350 is shown clearly in the lease rising by say inflation why that is unfair and further why it should be capped at £250 – the developer and those who have subsequently bought the freehold have done nothing wrong other than seek a full price for their property as we would do if selling our own . In the case of flats lesses have been offered the rights of first refusal and if they turn it down and others rely on the promises/covenants in the lease to pay the rent then it is reasonable to expect that they receive it and if it is to be lowered adequate compensation should be paid
A fully disclosed rent showing its NPV would avoid an onerous rent being created because the purchaser would know the sort of discount they need to attain to reflect the obligation to pay the rent . In my example above of a £5k ground rent then the NPV of such a rent is around £150k therefore the lessee won’t be disadvantaged with such a rent provided he gets the flat for £150k less than one with only a token rent . My proposal would be that this NPV would have to be clearly shown next to the rent using a defined discount rate set by the government
In effect the lessee in my example is paying “interest” but called ground rent on the discount of £150k he has received for taking on that obligation to pay such a rent
If small ground rent have not be carefully considered by a purchaser notwithstanding the representation they should have received on purchase from their solicitor and valuer I don’t believe it is equatable that the initial rent should be lowered – so responsibly to look at legal documents carefully can and should be expected from purchasers – you cannot expect the state to sort every problem out . The idea of capping rents would assist about 96% of lessees at most by around £350 per annum – it’s not huge sums – yet the price paid for this if adequate compensation is not paid is the undermining of contract law and property rights
I look forward to evidence of a discount for leasehold properties (spoiler – there is no evidence).
I also look forward to seeing evidence of house contracts which clearly state the NPV.
Finally I look foward to you discussing the the issue of ground rents over £250 being onnerous with the banks. You will have trouble with that discussion as many banks have adopted this policy and ultimately it is their decision, not yours.
Here is evidence in the commercial sector where ground rents are created to create capital. In January this year an AIM listed company raised some £33 million by creating ground rents over its nursing homes it owned. They lowered the value of their property holdings by creating the rents – they then became the lessees and sold the freehold
https://otp.investis.com/clients/uk/caretech/rns1/regulatory-story.aspx?cid=321&newsid=1229327
Having raised the capital should they cry its all unfair and seek to have the ground rents they created reduced to £250 fixed forever ? Of course not because they knew or should have known what they were doing – they made a promise to pay around £1m a year and got £33 million and other relied on those promises to pay
If we exclude commercial ground rents but caps are introduced on Residential then that would imply that purchasers of residential units had no idea what they are doing – very insulting for all parties involved and illogical
I am fully aware that banks seem to have an issue over ground rents over £250. It is noted that until 2017 they didn’t have a problem and life ticked on OK. It is the lenders knee jerk reaction to 10 years doublers that have made banks jump at a figure of £250. I cannot understand why that once a rent goes above £250 it should cause such a worry. £250 is hardly a large sum as an outgoing and is dwarfed by mortgage payments which could easily move by a £1000 if there was a small uplift in interest rates. It is of course their decision and not mine, but it is my right along with everyone else to make observations on such proposals
The point is whether there is any movement in the value of a flat when there is or is not a rent the rent is still a promise/covenant to pay and becomes a valuable income stream. If it is put on the table considered over a 2-3 month period with input from professional advisors why should it be reduced when others have relied on that promise to pay?
Help need to given so that purchasers know what they are entering into but the idea that something above £250 ie say £350 is such an issue as to ruin the sale prospects of a flat worth say £250k is frankly ridiculous . Banks adopting rather simplistic stance on such matters do not help their borrowers or the security in which they hold. It should take a few grand off the value of the flat but not to the point it becomes too problematical to lend on.
“I look forward to evidence of a discount for leasehold properties”
You did not provide this evidence.
Your link does not have any figures which show a discount for a leasehold property.
Your link does include figures that show a profit from ground rent transactions:
– “raised £32.6 million in cash to further support its growth strategy through a ground rent”.
– “One property with proceeds of £1.1m and £34k of annual rent is subject to a deferred completion” NB deferred completion is not a discount… it just means the sale happens at a later date.
An interesting argument but hollow all the same. Today an overlap has been created between Residential Leases with Commercial Leases. When a Mortgage is agreed between a Lessee and their Lender at what point are they made aware that there is an outstanding Charge from an incoming speculative Ground Rent investor? What has happened over time is that a Lessees Dwelling has become part of a business. The Ground Rent at £250 equals a Shorthold Tenancy this sum is specific to the various Housing Acts. By rights they should have a level of protection under the same – they do not. High St. Lenders are responsible for this farce, as to when the financial bubble bursts, it will be them in the firing line. It won’t be too long before the country is back in Negative Equity. Personally I would never have allowed a business to make money out of another’s Dwelling. Considering how much money is currently off-shore I agree that these speculators knew the risks and as such can afford the hit. If they do not pay up, then start to liquidate their assets via the Land Registry by having all owner occupiers at the time being named as automatic Freeholders… This would only need to happen a few times before the message was felt in their wallets. This would then create a government revenue stream aided by Leaseholders being able to sell up and move on. This financial imbalance has hit ordinary families to the point where they now may not be able to afford another mouth to feed. Means Testing is applied when agreeing a Mortgage but falls flat as to Implied Covenants which have not been taken in to account as to their overall cost and how much this increases the monthly outgoings. Ground Rent is only part of the problem, it’s all the various ‘add ons’ which have the worse impact. Lenders too should get ready for a hit for those who simply want to be put back to where they should be before signing up. It should be possible to Void certain Mortgages and return what the Lessee borrower has spent.
B says :-
When a Mortgage is agreed between a Lessee and their Lender at what point are they made aware that there is an outstanding Charge from an incoming speculative Ground Rent investor?
The terms of the “charge” is set out in the lease which is for all to see before taking on the terms
This is why I maintain that the NPV of the rent needs to be shown clearly next to the premium when a lease is granted and updated every time the flat is sold so the lessee knows in advance what he is entering into .
It not appreciating what that obligation is in respect of the ground rent that causes the problems
In the example I gave above where a company created leases with ground rents of £1m a year over its own property and sold the freeholds to an investor for £32.6m everybody knew what they were doing and nobody can claim the deal was unfair and seek to have the capped.
But in residential situations where the rent is a few hundred pounds purchasers fail to consider what they are agreeing to – so unless the rent review pattern is outrageous then the deal must stand – it’s not the freeholders fault that the purchaser and his professional advisors were not vigilant
Stephen, your regular proposal that NPV of the rent needs to be shown clearly next to the premium when a lease is granted takes no account of several issues:
1. Existing leaseholders did not generally enjoy such transparency
2. Premiums typically have not been reduced to reflect the ground rent burden
3. Individual purchasers have little bargaining power – other than to walk away
4. Even when requested in advance, lease details are not generally not available until a sale is agreed and purchasers have started to incur legal fees. Walking away then becomes expensive and frankly, not an option for many people, especially as the next attempted purchase will likely be on similar terms.
5. Knowing what you are entering into does not make it fair or reasonable – it is a captive marke
And most importantly:
6. It is fundamentally wrong to monetise the nation’s homes and turn ordinary people into cash cows.
You are choosing to miss the point that this is about an imbalance of power. It should be the goal of government to set up a system that enables people to simply own their own homes, unencumbered by freehold investors.
Finally, regarding your view that £350 is where you think ground rent becomes onerous, interesting that you set this above the £250 threshold which introduces a greater risk of foreclosure as the long lease protections evaporate leaving the leaseholder effectively in an AST agreement making it much easier for the freeholder to seize their property in the event of arrears of a few hundred pounds.
Who, besides the freehold investors that profit from them, could possibly think ground rent is a good idea?
Abolishing ground rent for new builds and capping them for existing leaseholders is the only acceptable solution in my view.
Whether the premium reflect the ground rent or not is not really the issue. The point is that paying a ground rent is a negative obligation for no benefit and is of course part of the overall consideration the developer wants. Its laid out in front of the purchaser for their professional advisors to consider and it must therefore be upheld except in cases where the purchaser was misled.
To suggest that lessees are bludgeon into signing the lease and therefore the rent should be removed seem one sided against the holder of the income stream. If they feel they have overpaid and legislation comes in to retrospectively give purchasers the right to challenge past agreements then why is the claim not for a reduction in the premium paid. In other words why does the rent not stay the same but the claim be for a reduction in the premium paid against the developer.
If legislation varying current rents is introduced then it opens the floodgates so all purchasers of property could make claims. What of the purchaser who buys a freehold house who also feels pressurised into buying a property which on later reflection (or upon economic events changing) appears over priced. Could he not argue, riding in on the same coat tails, advancing much the same arguments that he too should get compensation ?
When rents are typically in the range of £250 to £450 (which the vast majority are) why all the fuss ? Capping of rents would be a fiercely confrontational matter and long drawn out appeals to the highest courts will no doubt be heard over compensation claims for what?…. a couple of hundred pounds a year at most for each lessee . Much of this passion is fuelled by some lenders not really reflecting properly on their definition of onerous rents making some lessees who hitherto had not thought they had a problem, but now find they do have problem which on greater reflection the result of the imposition of a simplistic definitions of onerous.
Further whether the rent is £350 or £250 I do not understand why at this sum the value of a home worth £250K is blighted to the point it becomes un-mortgagable. It is, as I have said on a number of occasions, a result of a near hysteria over the subject of these rents resulting from a knee jerk reaction to 10 years doublers
What of the case which I highlighted the other week where the freehold owner of a commercial property creates a ground rent of £1 million a year by granting a lease to itself reserving such a high ground rent and then selling that freehold which now receives that £1 million a year to an investor for some £33 million. All should surely agree that the deal must stand. The owner who created the lease and will now be paying the rent knew precisely what they were doing and the purchaser relied on such a covenant. Why should that rent be capped?
What about deals where the landlord takes a much smaller premium for a ground rent?. The lessee was given a number of options and if they elect for such a deal why should later on that rent be reduced.
If a purchaser genuinely believes that their ground rent is too high there could easily be introduced a formula with prescribed variables for a lessee to be able to lower the rent for a premium. It would not require a valuer an online calculator would be made available and as a simple deed of variation neither would a solicitor have to be involved, once executed it is sent into the Land Registry with a token registration fee. The term would still remain as would the terms of the lease.
You may think my view is rather one sided against income stream holders but perhaps you should read my post again. I didn’t say or suggest that because some lessees were bludgeoned (good choice of word by the way) into signing a lease that therefore the rent should be removed. What I actually said is that I think abolishing ground rent for new builds and capping them for existing leaseholders is the only acceptable solution.
I am also mindful that any proposal to address escalating ground rents in existing leases would be subject to impact assessment and would need to pass various tests including to ensure any changes are lawful, so income stream holder interests would be factored in before government took any decisive action.
On the other hand you did say, ‘whether the premium reflects the ground rent or not is not really the issue’, then you later ask, ‘what about deals where the landlord takes a much smaller premium for a ground rent?’
So it seems you are saying that the premium is an issue but only if the developer/ freeholder is disadvantaged and on that basis (except for missold contracts) all signed contracts should be upheld regardless of how onerous the terms may be. Is that not rather one-sided on your part against leaseholders?
Re. your other point about not understanding why a ground rent of a few hundred pound is deemed onerous, suggest you follow this link and keep an open mind:
https://publications.parliament.uk/pa/cm201719/cmselect/cmcomloc/1468/report-summary.html
This not hysteria Stephen. ‘Professionals’ have been offering advice that has helped developers to normalise lease terms that are not necessary or fair for far too long, but people are now beginning to see the ’emperor is naked’ and that’s not ok. I can understand why income stream holders don’t like this.
The report you refer to states
Any ground rent is onerous if it becomes disproportionate to the value of a home, such that it materially affects a leaseholder’s ability to sell their property or obtain a mortgage.
If we take a flat ordinarily worth £300k with a small ground rent of say £250 but instead impose a rent of £10000 per annum linked to the RPI the flat would sell for around £50k
As time passes that rent will rise by the RPI but the flats value will always by around 25 tomes that ground rent less than what it would be worth ordinarily – so what is the problem . Is the lessee disadvantaged – no he is experiencing exactly why he signed upto . Is the flat difficult to sell – no it costs overall the same as any other flat to own – the small acquisition cost offset by the large rent .
There is nothing whatsoever wrong with that deal PROVIDED the purchaser knows what the cost of the rent is and appreciates its terms – hence why I suggest the NPV of the rent is disclosed in the granting of the lease
The committee refer to the ground rent offering no service to the lessee – this is odd as it is patently clear in a lease that a ground rent is not used to defray expenditure and is part of the consideration paid for the flat
I seem to remember you asserted previously that ground rent bears no relation to the purchase price and it should be seen simply as part of the overall consideration.
Have you changed your mind now, as you now seem to be suggesting you expect there is such a link and so you argue this is fair?
RPI certainly bears no relation to house prices and no doubt in due course disproportionate increases will be added. So is that ok?
You also only seem to have read selected parts of the report and your argument circles back to rehearse old points which we have already covered earlier in this thread.
And don’t mistake my points about RPI as any form of agreement that more measured, increases would be ok. I am simply highlighting the holes and inconsistencies in your shifting arguments.
Escalating ground rents are a manifestitation of an unfair system where the imbalance of power has enabled developers to impose profit boosting lease terms that are not fair and are not necessary.
This is exploitation. Plain and simple..
And the legacy of unfair leases grows with every new build sale offered on such terms. – and there are still plenty of them. Houses less so after recent shaming of developers, but flats are still affected. It is a disgraceful affair.
Perphaps, like my earlier posts, you will only read what you want to read and ignore the salient points. You can continue to rehearse your old arguments but the cracks in your position are clear to see.
My perception that you are being rather one sided is simply being reinforced by your familiar replies.
Ground rents bear no relation to house prices – there is no link. It is entirely up-to the developer to select a rent . Like all developers and homeowners they will try and get the best possible price overall. So yes they will try to impose the best possible rent and premium – to be expected in our free market economy.
It is clear that lessees and their advisors have not in many cases considered the implications of the ground rent they are entering into and some have exploited this- but that does not mean that all rents should now be capped at £250 -the NPV of the rent needs to be shown next to the premium paid
As a fixed income stream would be eroded by inflation developers seek to improve that steam of income by hedging it against the RPI – it is probably the only easily available index that can be used – there are many others but the fact it is readily available and will be the time that indexed linked gilts exist make it the index of choice.
Personally I thing it should be linked to Average earnings therefor the rent can never get out of hand should inflation spike and earnings fail to keep pace
Do you really think our house builders are operating in a free market economy?
They suckle on the teat of taxpayers and they are determined not to let go.
They were bailed out, along with the dopey and greedy banks, after hyper inflating utterly pointless residential assets during the boom, and are now dependent on Help To Buy and numerous other taxpayer-subsidised sweeteners to provide a modest supply of over-priced, badly built housing stock.
And their gratitude? Shafting often clueless first-time buyers with predatory lease terms. (And bribing conveyancers to act in the sellers’ interest, and debasing this modest but important area of law.)
Housing should be a very dull backwater to the economy, with capital flowing into creative, real free market industries and services which will actually contribute something to our society.
Cheating over housing contributes nothing at all.
I would agree with much of the later part of you post.
Alternative investments whereby money is invested in business that employ people (particularly the young) should be encouraged. BTL has run out of steam with its growth and its attraction occurring whilst interest rates collapsed.