Report: Time to reform ‘archaic’ leasehold system
THE “archaic” leasehold system is turning the dream of home ownership into a nightmare, according to a campaign group.
The HomeOwners Alliance said people are being “bamboozled” by the system, the origins of which date back nearly 1,000 years, which is seeing leaseholders being charged exorbitant fees and rendering properties unsellable.
It said analysis of available figures suggests there are 1.577 million owner-occupied leasehold properties in England and Wales, of which roughly nearly three-quarters are flats or maisonettes and more than a quarter are houses.
People living in a leasehold property have a legal right to occupy and use it for a set period, typically from 99 to 999 years, with certain conditions set out in the lease.
Leaseholders pay fees to the freeholder who retains legal ownership of the ground on which the leaseholder’s home is built.
When lease periods fall below 80 years, it can become very expensive to extend the lease or buy the freehold, the HomeOwners Alliance warned. It can be hard to get a mortgage on a property with a short lifespan on the leasehold and also difficult to sell the property.
This may lead to the value of a leaseholder’s home dwindling, even in a rising property market. The cost of extending a lease can add up to tens or hundreds of thousands of pounds meaning some people simply cannot afford to do so, the HomeOwners Alliance said.
Paula Higgins, chief executive of the HomeOwners Alliance, said the leasehold system is “a slow burn scandal that is now simmering”.
She said of the system: “It is as complex as it is unfair, landing many home owners with vast and exorbitant fees, punitive restrictions, and depriving them of many of the benefits of home ownership...
“At the HomeOwners Alliance, we see first-hand how the leasehold system too often turns the dream of home ownership into a nightmare.”
A survey by the HomeOwners Alliance found nearly a quarter (24 per cent) of leaseholders who knew their length of their lease said it was below 80 years. The alliance said analysis of these figures suggests more than £4 billion may need to be paid to freeholders to extend these leases over the coming years.
Its report highlighted cases including a home owner being told she is liable to pay for work on her home that she did not request and another woman having to sell her flat which had a 74-year leasehold at a discount.
The report described the “archaic system of leasehold tenure” as “a relic of English law that dates back to the Domesday Book”.
It said in 2015, leasehold properties accounted for 43 per cent of new build registrations with the Land Registry, almost double the proportion (22 per cent) in 1996.
The HomeOwners Alliance is urging a review of the whole leasehold system, with commitments to scaling back leasehold, standardised leasehold contracts, and a ban on the creation of new leasehold houses. All lease extensions should be a minimum of 250 years, with a peppercorn rent, it said.
The report comes after the Law Commission last week urged a crackdown on shock fees charged to older people who have moved into retirement leasehold properties.
When the Government recently launched its housing white paper, to fix the “broken” housing market, Communities Secretary Sajid Javid said: “We will tackle the scourge of unfair leasehold terms, which are too often forced onto hard-pressed home buyers.”