Prominent leasehold reform campaigner Louie Burns has warned that the Government’s proposals to reform the leasehold house system risk creating a two-tier housing market and do nothing to assist leaseholders already affected by the national ground rent scandal.
Yesterday the Government confirmed plans to abolish the selling of new houses as leasehold properties and reduce ground rents for new leases to zero, in a move it says will end the “unscrupulous practice of unnecessary leaseholds”.
Louie Burns, Managing Director of enfranchisement specialists The Leasehold Group of Companies, said: “Naturally, we welcome the ban on ground rents for new leasehold houses. There is absolutely no reason for a house to ever be sold on a leasehold basis, so ending this exploitative model of home ownership is certainly a step in the right direction.
“If the Government has felt the need to step in and change legislation to ban the sale of leasehold houses this proves that it was clearly wrong to sell them as such in the first place.
“However, there are thousands of people who already own houses on a leasehold basis and these proposals do not remove their obligation to pay ground rents. These proposals do nothing to help existing leaseholders and will create a two-tier market, where the values of leasehold houses will fall further as the properties become increasingly unattractive to buyers.
“Something must now be done to help those already trapped by the leasehold house scandal, not to mention the millions of leasehold flat owners who are still affected by onerous ground rents, unfair service charges and exploitative informal leases that offer no legal protection. The Government now needs to act quickly to help the many people already caught in this trap.
“It is also shocking that the proposals allow exemptions, such as in the case of The Crown Estate, the National Trust and retirement sector; to enable freeholders to continue to profit by exploiting retired people through ground rents and event fees is absolutely scandalous.”
Ministers will also introduce a new time limit of 15 working days for freeholders to provide leaseholders with the vital information they need to sell their home and set a maximum fee of £200 to make the home buying process quicker, easier and cheaper.
The Right of First Refusal, whereby the freeholder must first offer the leaseholder the opportunity to buy their freehold before they can sell it on to a third party, will be extended to leasehold houses for the first time. The Government has also said it will address legal loopholes within the existing Right of First Refusal for leasehold flat owners.
Louie continued: “We see numerous instances where freeholders drag their feet and charge exorbitant fees to provide information, so setting a new statutory time limit and capping the level of fees that freeholders can charge is very welcome indeed.
“We also welcome the introduction of the Right of First Refusal to leasehold houses, but it will be vital to ensure that the purchase price for the freehold is reasonable; house owners are often quoted huge sums to purchase their freehold, so the Government must specify a fair mechanism to value the freehold.”
"If the Government has felt the need to step in and change legislation to ban the sale of leasehold houses this proves that it was clearly wrong to sell them as such in the first place."
Managing Director of Leasehold Solutions