Leaseholds need to be explained – not banned

SIR – The Government has proposed to outlaw the sale of residential property that is leasehold and subject to ground rent (report, July 25).

This would be a mistaken interference with a property legal system that has largely stood the test of time and provides a level of flexibility that other systems do not.

The problem today results from the incompetence of solicitors who fail to explain the effect of the draft leases for purchasers. This allows developers to “have their cake and eat it”, obtaining an initial price close to a freehold price, plus the deferred price obtained through the rental stream. If purchasers properly understood what they were taking on, they would either withdraw from the sale or offer a much reduced price.

This would lead to a two-tier market with one price for freeholds and a lower one for leaseholds. Those opting for the leasehold market would do so in the knowledge that their asset might depreciate over time but would initially cost less, while the developer would be accepting a lower initial sum but be compensated by the future rental stream. Banks and building societies providing finance would quickly adjust their terms to accommodate these differences.

PGD Cooke-priest

Shabbington, Buckinghamshire