Less than 2% worried about about ground rents when buying a flat
Less than 5% have a good understanding of commonhold, but …
… APPG on September 11 is to consider the ground rent scandal, the government response to it … and the need for commonhold to replace leasehold
The LKP-accredited management company Urban Owners has found that only 41.9% of leaseholders have had their solicitors explain their lease.
24.2% admitted that they did not actually read their lease.
On the other hand, 18% wished that they had been better informed about ground rents, service charges and the costs of extending their leases.
Urban Owners, founded by former management consultant Steve Wylie, is probably the foremost right to manage specialist in the country, carrying out 10 RTMs a month. The Urban Owners right to manage guide can be read here
It has briefed the Department of Communities and Local Government on management practices in the leasehold sector.
The research aimed to find out how aware leaseholders are of the different forms of property tenure that are available for flats.
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As it happens the All-Party Parliamentary Group on leasehold and commonhold reform, which is organised by LKP as the secretariat, is to consider commonhold at its meeting on September 11.
In the Urban Owners’ research, compiled by Edward Morris, 85.5% claimed to have a good understanding of leasehold; 76.9% of freehold; and 54.3% of share of freehold.
Of commonhold, on the other hand, only 5% believed they understood what it is, and were aware that there are no ground rents or lease extensions necessary for a commonhold flat.
When buying a new flat only 2% said that the size of ground rent would be an important consideration. This was against 66.7% who would be concerned by service charges, with type of ownership structure coming second at 27.4%.
The Urban Owners report says:
“The view of those in the industry is that Commonhold, introduced in 2002, is the most beneficial to residents, but has yet to gain much momentum and/or exposure.
“This is mainly due to the ‘little incentive for property developers to choose Commonhold over Leasehold when constructing new-build flats’ .
“This is because they will not receive additional income through lease extensions in the future. Economically speaking, you would expect the difference to be accounted for in the original sale price, but this does not seem to be the case.”
The Urban Owners report in full here: UrbanOwnersReport
Related posts:
Leaseholders need ‘counselling and relationship advice’, says LEASE chair Dr Sigmund Southam
Right to manage champion Urban Owners joins LKP
RTM champions Urban Owners bought by Warwick Estates
Affluent London leaseholders are just as likely to be kicked around as poor ones, finds the Sunday Times
Barclays refuses mortgages over lease terms at Taylor Wimpey’s prime Chobham Manor
Now Bovis says ‘Our houses are freehold’. (Gleeson’s always were …)
Looking at starter homes/flats in particular whilst most people would prefer a freehold and do recognise that leasehold is a lesser option, I believe the general view is that purchasers think to themselves that the length of lease is such that they will have moved well before the effects of leasehold has any bearing on their properties.
It is a similar case with those downsizing into retirement developments. “What does it matter, I won’t be here in 25 years?” is the reasoning for dismissing the peverils(typo perils) of leasehold.
Sadly, in the former case the purchaser soon realises that leasehold has immediate detrimental effects on their property and in the latter case, the children of the residents can end up in penury!
Most homebuyers think ground rent is a type of service charge and pays for maintaining the ground outside like cutting the grass.
What conveyancer has the time to explain a 60 page lease to an average person with no legal knowledge. Most homebuyers are thinking about the the decor and getting a mortgage not an academic debate about types of tenure and legal rights such as S. 8 in Housing Act 1988..
The complexity of leasehold law makes it ‘not fit for purpose’ and impossible to explain to the average person who does not have a law degree. If Help to Buy employees don’t understand tenant rights or lack of them why would the average homebuyer. The system is run by vested interests who are even able to set up investor funds like GRIF on the back of ordinary people. Its’ legal robbery and the likes of Stephen are just being opportunistic and protecting their money making schemes with the backing of Government.
Exactly most people buying their first home are checking out things like kitchens and natural light, – we are distracted from studying the intricacies of landlord and tenant legislation. for freeholder investors its like taking candy from a baby… in any case even its best that we do not understand the legislation its pretty grim.
Funny thing is that most people understand the concept of a leasehold car and not a leasehold property?
I used to think that payment of ground rent meant that we leased the ground on which the property stood whilst owning the flat but apparently not! When I read in the lease that the property will return to the freeholder at the end of the term I was shocked that such a system can exist in the 21st century and have been even more shocked by the extortionate cost of extending the lease. It is a legalised scam and I agree ‘leasehold is not fit for purpose’ and ought to be abolished.
Ps. Our development is a 1960s one that was built on what appears to be former farmland and the freehold later sold to a chartered surveyor who clearly understood how to play the system and make a mint out of the leaseholders when they woke up to the need to extend their leases. Nice little earner when he hit pensionable age! There is nothing in my lease that even mentions the possibly of extending the lease and it begs the question why Parliament in 1993 and again in 2002 did not instruct freeholders to add an addendum to their leases informing leaseholders of their statutory rights and highlighting the need to extend the lease at the earliest opportunity! If I have seen the phrase ‘marriage value’ and the 80 year rule mentioned in the lease, it would have been a red warning flat and may have stopped me purchasing the property or at least highlighted the need to dig deeper and clarify what it meant but instead, thanks to Parliaments lack of foresight and my solicitors failure to understand how the valuation system works, I am now facing a lease extension premium that is £15,000 higher than it would have been had I been advised to extend prior to completion. There you go, an insight into the reality of how the system has been designed to fill the pockets of the freeholders fraternity (or the Landlords as the 1993 Act calls them) and fleece leaseholders.
Pps. For any MPs reading this, please do your best to get to grips with this subject and wake up Parliament to the unjustness of it. If you have watched Poldark it is a system that the devious banking freeholder and social climber Warleggen would recognise and approve. It keeps people in their place, under the thumb of a self-righteous overlord whose greed knows no bounds. Abolish leasehold and liberate leaseholders from enslavement to an overlord whether he goes by the name of an investor or some other fanciful title. It is a system rooted in feudalism and it is time to consign it to the bin of history and restore to leaseholders the dignity of owning their own home. Leaseholders will I am sure be watching come election time.
who is your MP?
I think housing and leasehold in particular should be one of the most important issues with parliament. it’s up there with Brexit.
If you google ‘Benefits of ground rent’ interestingly the search does not find a single benefit for the tenant.
Google search reveals GRs for sale, Buy as investment – Allsop, Benefits of Investment, sell your ground rent etc..
Interesting that we have a law that benefits the freehold investor but has no benefits for the tenant.
Interesting that so many MPs and Peers don’t want change and support City investment funds that receive their income from tenants.
Let’s hope Javid will stop leasehold corruption and take on the powerful property lobby. Strange that Javid and Sharma the Housing Minister are both investment bankers and so far have done nothing.
I urge all flat leaseholders to email Sajid david with their recommendations for a root and branch reform of legislation affecting leaseholders. A consultation has been initiated starting on 25 th July for a period of 8 weeks. Please email your suggestions- this is our chance as flat leaseholders to effect real change!! The Rachmanist tactics of Freeholders, their dodgy ‘Mangaging agents and debt collecting solicitors who if reported to the SRA would probably be put out of business, not to mention compliant surveyors need to be brought to heel. I shall be writing to him and recommending that ‘FORFEITURE ‘ REGULATION OF MANAGING AGENTS’ ABOLITION OF LEASEHOLD’ ‘ should be included in the consultation, and explaining why. We flat leaseholders must not let this moment be solely concentrated on the shocking ‘Leasehold house’/ onerous ground rent’ scandal. I understand that it’s a hassle and a bother to set aside time to write to politicians who in all probability will ignore our correspondence, however, it is imperative that we continue to harry the powers that be in order to change the status quo.
Sajid Javid also has a facebook page, I regularly post my points and frustration there.
I have written Savid Jarvid a letter asking him to include removal of ‘Forfeiture’ and regulation of managing agents in his his consultation and explaining my reasons why. I wonder if I should send it to him on Facebook as well- will it be made public? If yes then good!
My flat had a 99 year lease which began in 1969 even though the properties were not for sale until 1972 , so 3 years gone already. I bought the flat in 1982 by which time the lease had reduced to 86 years. When the 1993 Leasehold and reform act came into being my lease was than down to 75 years, below the benchmark for the marriage value. I was unaware of this and it wasn’t until I read various articles in the press and latterly this website that I realised I had to extend, which I did for a considerable amount of money. My flat is just a modest 2 bed property on an ordinary estate, I think most people living here would be very reluctant to part with the amount of money that could buy a nice family car, and the elderly residents would probably struggle to find the sums needed anyway. So now we have a situation where 50% of the flats here have been bought for cash and are now buy to let. Disgraceful.
I could not agree with you more. Also worth remembering that if the right cash buyer did not buy those properties, they would revert to the freeholder. Or the freeholder could speed up the process and buy them cheap. If the freeholder controls 1/3 of the units. (Not half just one third and holds some without a lease, which they can do because they can simply rent them out as assured shorthold tenancies) the remainder leaseholders CANNOT enfranchise or form form an RTM. Not being able to form an RTM is a complete disaster for leaseholders and a lovely trust fund for the freeholders grandkids – which is why leaseholders need to wake up and take action.
ANON. Google a blog called ‘ Romney court The leaseholders were desperate for RTM but refused it. Disgraceful set of affairs.
Clarification- google ‘Romneycourt Leaseholders fight in vain for RTM . Utterly disgraceful.
I read that, thank you for posting the info Kim. Do you happen to have any knowledge as to the final outcome? The last post is from 2008 and sounds pretty horrific situation. Why leaseholders have to suffer for years before anything is done it’s totally beyond me!
Hello Leasehold reform- in 2009 the LVT removed ‘county estate mangement’ whose CEO was also the freeholder of Romney Court as mangers of the property for a 3 yr period. Rendall and Rittner were appointed receiver managers for that period. The freeholder of Romney Court buys residential ground rents. and is a director of Westbury residential Ltd . Was also a director ‘Solitaire managing agent’. Google RCP LTD!
In addition to my my previous post
1 Google ‘ RCP Coast Freehold Income Fund.
2 Charter Quay ruling 2011
3 Westbury residential ltd which was incorporated in 2011 and whose major shareholder is the freeholder of Romney Court and was the CEO of ‘County Estate Management’ ( CEM)/ Solitaire property Management.
4 In 2015 I believe that ‘Westbury ‘was appointed Manager to a block in London by the FTT. How could that happen?
????????????I had a quick search, thank you for the useful info. What a frightful mess it all is! The usual maize of directorships, company structures, tax dodging and a charitable foundation thrown in for good measure. They really do know how to work the system, similar business model with our splendid lot, actually. They are also ‘landlords ‘ and with AST’s
Indeed!!” What a Frightful mess”. I wonder if donations are being made to either of the main political parties from individuals who set up labyrinthine structures. Perfectly legal I’m sure but shouldn’t be.
What the leasehold situation has now created is a can or worms, which one could summarize in these points. Leasehold properties have become unsalable. People who need to relocate to another job or simple want to sell for any other reason are in the worst possible situation . This will have the effect on freehold properties pushing prices up in the wrong sector of the property market. The shock effect of the leasehold has created – I think the most recent figure is about 4 mln people (maybe not all of them with doubling rent every 10 years) who at some point in life could become evicted if they cannot pay their rents in the next 30-60 years. For the Tories and Labour to promise affordable housing they seem to forget why prices are actually rising. If people cannot afford to live in their properties not to mention own them, the end result is properties going back to landlords and snapped up by “buy-to-let” schemes forcing rents going up. Those who own leasehold properties will pass any rent increases to tenants.
Talk about generations of people in the UK not being able to have a living place of their own. As long as the property market is used for profit by vulture capitalists nothing will change.
If politicians want to do something about affordable housing building homes it one route, getting rid of a system that is out of touch with UN articles is the other.
Good points. Would love to know which politicians are freeholders, who are leaseholders and who have “buy to let” investments. Of course theses things are not simple: it’s common practice in some circles to hold property titles in the spouses names, mother or someone else entirely. One has to follow the money to see where it goes…
I Liddle: Has the freehold of your property changed hands since 1982 ?
In reply to Alec , no, not as far as I am aware. Would I be notified if it had and why do you ask ?