Leasehold system ‘must be abolished’
THE leasehold house ownership system should be abolished and not fixed, campaigners have said as one MP likened it to the PPI scandal.
The National Leasehold Campaign (NLC) said it hoped a warning to builders from the competition watchdog yesterday would ‘shame these developers and investors into action’.
It came as the Competition and Markets Authority (CMA) found evidence that four of the country’s biggest housebuilders had mistreated buyers, misleading and trapping them in leaseholds with ground rents that double every decade.
“This scandal should be dealt with urgently, residential leaseholders have been abused for years. This is as bad for those concerned as the PPI scandal,” said Sir Peter Bottomley MP, who co-chairs the All-Party Parliamentary Group on Leasehold and Commonhold Reform.
A freeholder owns both the house and the land it is on while a leaseholder basically rents the property for a fixed period – sometimes centuries.
The NLC believes leaseholds should be replaced with a commonhold system, which gives freehold control of a property and shared ownership and responsibility for common areas and services.
Until the turn of the century most leaseholds had been set at peppercorn levels - just a small payment to validate the contract, the CMA said. However, investors were looking for stable returns as a replacement for low interest rates and started baking bigger fees into the contracts.