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Communities Secretary, Sajid Javid, promises to Free Leaseholders from 'Feudal' Leasehold Practices

Communities secretary says new rules will make extending or buying a freehold easier, cheaper and faster.

 

In a recent statement, the communities secretary, Sajid Javid, has told the UK's 4.1 million leaseholders that they are set to be freed from “feudal" leasehold practices in the property market; announcing that new rules set to be implemented by the Conservative government will make extending a lease or purchasing a freehold “much easier, faster and cheaper”.

 

Javid continued by stating that the government would also go ahead with a ban on leaseholds on new-build houses first announced in July, and will force developers to cut controversial ground rents to zero for all new apartments and houses.

 

Furthermore, he confirmed that the government would write to all developers that have sold homes with “onerous ground rent terms” to ask them to provide “necessary redress”. Housebuilding and general construction powerhouse Taylor Woodrow has set aside £130m to assist leasehold buyers, but other developers have steadfastly refused to pay any form of compensation.


Despite the fact that Scotland has largely abolished the leasehold system, almost one in five of all properties in England - approximately 4.2m homes - are leasehold. A boom in the construction of apartment blocks UK towns and cities, in addition to the increasing amount of property developers profiting from selling houses as leasehold has seen the number of leasehold properties skyrocket in recent years.

 

With this, many homebuyers have found themselves exploited by their freeholders. Reports of homeowners trapped in spiralling ground rents, sometimes doubling every 5/10 years, are becoming all too common. Recent news stories have seen freeholds sold on to specialist companies demanding huge sums if the homeowner wanted to buy their way out. In extreme cases, homeowners have been left with homes made virtually worthless as banks will no longer lend against them.

 

Javid said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms. It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices.”

 

The Department for Communities and Local Government (DCLG) said it will be “working with the Law Commission to make the process of purchasing a freehold or extending a lease much easier, faster and cheaper”.

 

Under a new approach the DCLG is understood to be considering, property experts predict that some leaseholders could save nearly 50% on the punitive sums many are forced to pay once a flat’s lease drops below 60 years. Under the current system, a £200,000 flat with 50 years left on the lease would cost around £36,000 to extend, but in contrast, under this new approach, it would only cost around £20,000.

 

Government officials have promised that the new rules, including a new formula for calculating leasehold buyouts, will be in place by the end of 2018.

 

James Wyatt of Parthenia Valuations, whose model for valuing leases is among those being studied by the DCLG, said that this leasehold reform will end the £500m a year “gravy train” of excess fees and charges earned by freeholders, solicitors and surveyors.

 

Gavin Barwell, former housing minister and now chief of staff to Theresa May, has been the driving force behind the recent push for leasehold reform, and has enabled Sajid Javid to push through laws that will hit many wealthy freeholders. Yet, there is still concern amongst some of the industry's leading advocates for reform.

 

Sebastian O’Kelly, Director of the Leasehold Knowledge Partnership, called it “a huge vindication of our efforts”, but has warned that “...there is plenty of wriggle room here as the issue is referred to the Law Commission, where doubtless the sector and its grisly trade bodies will have their baleful influence.”
 

Similarly, Justin Madders, the Labour MP whose constituency of Ellesmere Port and Neston is a hotbed of leasehold issues, said: “There is still a risk that the government could kick this into the long grass leaving thousands of people still trapped in unsellable homes."

 

“Urgent action is needed now for those with doubling ground rents and unfair fees and charges in their existing leases and I will be seeking a meeting with the housing minister to set out in detail the straightforward process for purchasing the freehold that I have proposed.”


 

Collinson, P. (2017) 'Sajid Javid promises to liberate leaseholders from 'feudal practices'', The Guardian, 21 December [Online]. Available at: https://www.theguardian.com/money/2017/dec/21/sajid-javid-promises-to-liberate-leaseholders-from-feudal-practices (Accessed: 21 December 2017).

 

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