Lease extension hope in battle over tens of thousands
GOVERNMENT RESPONDS TO MP’S CALL FOR ‘JUSTICE’ FOR OWNERS
HOME owners locked in a battle with a charity could be helped by the Government after being told they face charges of tens of thousands of pounds.
The long-running dispute concerns Newcastle homes, many in the city centre’s St Thomas area, where the freehold is owned by the Mary Magdalene and Holy Jesus Trust.
It means that homeowners own only the leasehold, which lasts for a limited time.
They have been told they can extend their leasehold, but the cost is likely to be more than £30,000.
They would then be eligible to buy the freehold outright, at a further cost.
While the extension is optional, those who fail to extend the leasehold will find it impossible to sell their home.
The Department for Communities and Local Government highlighted plans to make extending leaseholds cheaper and easier, when the case was raised in the House of Commons by MP Chi Onwurah.
But it was unclear when new rules would be put in place.
Ms Onwurah, Labour MP for Newcastle Central which covers the St Thomas Street area, told the Commons: “The St Mary Magdalene and Holy Jesus Trust in my constituency is a charity that is refusing to allow its leaseholders to extend their leases, in a wholly uncharitable way...when will my constituents get some sort of justice and the ability to extend their leases?”
Housing Minister Heather Wheeler told Ms Onwurah that new rules would be introduced to make it easier and cheaper for homeowners to buy the freehold outright.
She said: ”The Government is looking to standardise enfranchisement processes and has asked the Law Commission to review current arrangements, including the valuation methodology.
“This will support existing leaseholders by making buying the freehold or extending the leasehold easier, faster and cheaper.”
It comes as there are growing calls for reform of leasehold laws, which can lead to unwary buyers finding they face significant charges such as annual ground rent payments.
A property with less than 80 years on its lease steadily loses value, and lenders will generally refuse to provide a mortgage until the lease is renewed.
The Mary Magdalene and Holy Jesus Trust has agreed to extend leases, which would then allow residents to buy the freeholds to their homes.
But extensions to leaseholds on flats owned by the charity have cost between £30,000 and £40,000, while the charity says it expects the cost of extending the leasehold on a house to be higher.
The price is based on the value of the property, as determined by an independent surveyor, and how long the lease has left to run.
Sue Pearson, chair of the St Mary Magdalene and Holy Jesus Trust, said the charity had an obligation to charge the correct price to extend leases.
“We have a responsibility to the beneficiaries to get what they are worth.
“We cannot give them away, as we seem to being asked to do,” she said.
She agreed the cost was high, adding: “It’s valued by independent experts and it’s a valuable commodity.”
The charity had offered to sell the freeholds to properties but no householder had so far taken the offer up, she said.
She pointed out that solicitors acting for buyers have a duty to explain the situation with the leasehold or freehold to their client before any property is purchased.
The Government has announced it is banning the sale of houses on a leasehold basis. And the Law Commission has drawn up plans to protect householders by changing the valuation formula for freeholds, so that it becomes cheaper to buy a freehold.