The leasehold scandal has received plenty of press coverage, with horror stories of people living in homes that are impossible to sell, ever-increasing ground rents, leases being sold to third parties and impossibly high service charges.
Something receiving fewer column inches, though, is the impact on landlords of leasehold properties.
Here, we outline the story of one landlord who has been affected, explore the wider issue of leasehold, tell the tale of the determined individuals and residents’ committees across the country who are taking the fight to the government, and lay out why we’re backing the campaign to replace leasehold with commonhold.
What’s the issue?
The leasehold scandal originally came to public attention in 2017 when it was revealed that developers had been selling leasehold homes with spiralling ground rents and significant fees attached, leaving many homeowners stuck in homes they couldn’t sell and couldn't afford to live in.
This forced the government’s hand. A consultation was held and Sajid Javid, then Communities Secretary, announced proposals to crackdown on unfair leasehold practices in December 2017. Despite talk of tough new measures being introduced, there’s been little movement ever since.
In September 2018, the Law Commission stepped in with plans for 'radical' reforms for leaseholders of houses and flats. The Commission recently published its consultation paper on commonhold reform, following on from a Call for Evidence on commonhold in February 2018.
The consultation closed on March 10 2019. The final report, along with a number of recommendations on how to effectively introduce commonhold, will be published at some point this year.
As for the government, progress has been slow. In October 2018 it announced a new consultation on the reforms put forward by Javid at the end of 2017.
The consultation closed on November 26 2018 and the feedback is currently being analysed, but concrete plans still seem a long way off.
Meanwhile, on March 19 this year, the Housing, Communities and Local Government select committee published a report calling for changes to the leasehold system, with the main conclusion being that the ‘balance of power in current leases’ is ‘too heavily weighted against leaseholders’. The government is set to respond within two months.
And the most recent development is Communities Secretary James Brokenshire announcing an industry pledge to tackle toxic leasehold deals, with over 40 leading property developers and freeholders already signing the government-backed promise. But the pledge was immediately slammed as pathetic by well-known leasehold expert Louie Burns.
“Leasehold affects so many new home buyers”
Following a 35-year career working for an automotive manufacturer, and spells as a consultant in Europe, David Lester and his wife decided to become landlords when he retired. He took the tax-free allowance from his pensions and invested it into rental property.
They already had one rental home (as accidental landlords) and one holiday let, but shortly after deciding on building their own portfolio, they purchased a flat and have since added three 3-bedroom houses, with plans to buy another soon.
It was the purchase of the flat that first brought David into contact with leasehold issues.
“When purchasing the flat we were not given the full information about leasehold and the fact that, although we have a mortgage we pay every month, we will never own it. In addition, we must use a management company who we pay circa £1,800 a year despite over the last ten years them having done very little to maintain the development.”
Around three years ago they were charged an extra fee because they had let the property (in the mistaken belief that they were sub-letting a property they owned).
“Upon receiving the extra bill, I decided to contact the CEOs of both the management and ground rental companies,” David continued. “Both were evasive and non-committal (when it came to) accepting responsibilities to undertake repairs.”
To fight back he joined the residents committee set up and chaired by Hannah Yates (see below), and also became an active member of the residents Facebook group which Hannah formed. It was here he learned more about commonhold as an effective alternative to leasehold.
“Leasehold affects so many new home buyers,” David added. “Various governments over the last three decades have committed to sorting out this feudal system, however as it is the rich and big business that own the freeholds they’ve never had the backbone to do anything!”
In recent times, David has regularly raised the issue of leasehold – and replacing it with a system like commonhold – to help not just his fellow landlords, but all homebuyers who are affected by the issue.
‘We’re trapped by this scandal’
Hannah Yates, a busy teacher, mum and (more recently) the chair of her residents’ association, says she has ‘owned’ her leasehold home for the past 17 years, during which time she has paid huge amounts of money (approximately £50,000) to the management company of the development.
She re-established the residents association last year after she could not sell her property at market value (at the third time of trying) and in order to address the ‘long overdue maintenance issues’ on the estate.
“The main issue is the high fees charged, the botched repairs that have taken place and the awful state our properties are in, due to the neglect of the management company. We have been in regular communications with the management company, built up a working relationship, but progress is too slow and our charges are still too high - with further levies for proposed works - which is why I and many other residents wrote to Ed Vaizey.”
A recent residents meeting was held with Vaizey, Hannah's local MP and a former government minister, where he agreed to join the APPG for Leasehold and Commonhold and support reform of the leasehold system.
Hannah says the government does not fully understand the scale of the leasehold scandal. “Finding out you do not own a brick of the property for which you are paying a mortgage is a shock. Finding out that even though there are 94 years left on the lease, in just 14 years’ time the property is unmortgageable without extending the lease, is an even bigger shock.” (Hannah says 80 years is a critical number as most mortgage lenders won’t lend on a lease lower than this).
“Most residents in our estate did not know this when they 'bought’,” she added. “We are no more than mortgaged tenants. Tribunal is unaffordable and extremely time-consuming, and has not been a viable option to residents here. We are trapped by this scandal. We have a few accidental landlords who could not sell but managed to move out with the help of family.”
As well as arranging meetings, liaising with Ed Vaizey and knocking on doors of the residents in her estate (in her own words, it’s rather taken over her life!), Hannah was also invited to and attended a roundtable meeting with the select committee on housing and communities back in October 2018, and heard for herself the overwhelming evidence as to why leasehold should be abolished and replaced with commonhold - as it has been in Scotland and other parts of the world. She said the committee found a system that is not fit for purpose and a remnant of the feudal system.
A petition, calling on the government to abolish leasehold and consider commonhold as a viable alternative, says much the same thing. It was set up by Katie Kendrick - a children’s nurse and founder of the National Leasehold Campaign (NLC) – and has received more than 20,000 signatures.
This triggered a response from the government saying they are committed to reforming the leasehold system, but the number of signatures must reach 100,000 for it to be considered for debate in Parliament. You can sign and share the petition here.
Why we’re rallying behind the cause
Across our publications, we’re always keen to champion worthy causes. And we feel this issue, abolishing leasehold in favour of commonhold - which affects not just landlords and property investors but a significant number of home buyers and sellers too – is one that deserves plenty of attention.
To help boost the campaign further and shine a light on how big the issue is, we’ll be assembling an expert panel to get key industry opinions on the leasehold scandal. We will also be asking readers from all our publications – EAT, LAT, LLT and PIT – to send in their questions regarding leasehold/commonhold, which will be passed on to Heather Wheeler MP.
If you would like to find out more about the issues raised above, Leasehold Solutions – whose managing director is Louie Burns – can offer advice and tips, while Harry Scoffin, who describes himself on Twitter as a leasehold freedom fighter, has also written many articles on the subject.
You can follow the rest of the campaign across our publications by keeping an eye out for the campaign sticker at the top of this article.
Words by Matthew Lane, Angels Media