Leasehold reform: major political parties don't promise enough, says group

The Conservative and Labour party manifestos do not go far enough to tackle problems with the leasehold system.

That’s the view of Louie Burns, managing director of leasehold enfranchisement specialists, Leasehold Solutions. 

“It’s encouraging to see that both the Conservatives and Labour are paying attention to some of the problems with leasehold, such as escalating ground rents and the sale of new-build houses as leasehold, particularly as neither party even mentioned leasehold in their 2015 manifestos” says Burns.

“But they are insufficient to bring about the reforms needed to free home owners from unfair leasehold practices” he claims.

The Conservative Party manifesto includes a commitment to “crack down on unfair practices in leasehold, such as escalating ground rents.” But Burns is critical that the Tory manifesto stops short of calling for policies to reform other aspects of the leasehold sector, such as banning the sale of new-build leasehold houses.

The Labour Party manifesto goes further, he says, promising to give leaseholders “security from rip-off ground rents and end the routine use of leasehold houses in new developments.” Meanwhile, the Liberal Democrats’ manifesto makes no reference to leasehold reform.

But Burns says: “While the sale of new-build leasehold houses has garnered much media attention, the number of these properties is the tip of the iceberg when compared to the volume of leasehold flats coming onto the market in Britain. Many people are also unaware of the implications of letting their lease length fall, which can significantly increase the cost of a lease extension when the time remaining on the lease falls below 80 years.”

He says that even if the next government curbs or outlaws onerous ground rent practices, the owners of leasehold flats will still be stung by high fees when they need to extend their lease or purchase their freehold.

He says a better solution would be to abolish the unfair leasehold system, but none of the major political parties is considering such a reform.

“The issue of onerous ground rent clauses certainly also needs to be addressed, but it’s equally important that we look again at leasehold valuations, as the system works to the benefit of the freeholder. Under the current valuation methods, which are heavily weighted in favour of freeholders, leaseholders are required to pay inflated fees to extend their lease or purchase their freehold, which costs property owners millions of pounds in additional costs each year” Burns continues.

“We also need a better mechanism for holding errant developers to account; before the leasehold houses scandal, many home owners were unaware that their freehold had been sold out from under them to institutional ground rent investors. These leaseholders are now quoted fees in excess of £40,000 to purchase the freehold, or they are being offered unsatisfactory solutions like converting their 10-year doubling ground rent to one linked to the rate of inflation.”