An unwelcome new lease of life

6 April 2018
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Could you put a few coppers into my tin? I’m collecting for the poor, hard-done-by house-building companies in England and Wales, which have now lost one of the ways they used to fleece buyers.

Thankfully, they are still able to cut corners, build on flood plains, ignore fi re safety rules, install broken fittings, build ever-lower ceilings and use the cheapest materials to make a crust. But the cruel fact is that mean, old Sajid Javid, secretary of state for housing, has banned developers from selling new houses as leasehold properties.

What? You didn’t know that houses could be sold as leasehold? Join the club. It doesn’t make sense on any level other than as profit for the builders.

A leaseholder has to pay an annual ground rent to the ‘freeholder’ for the joy and privilege of actually living in the home they have bought. They also have to have permission from said freeholder if they want to alter or improve the home they have bought and paid for.

There is a small argument for running blocks of flats on this basis (though there are alternatives such as commonhold), but for a house? In particular, a new-build house? Hardly. Especially when you find out that some builders have even been adding invisible handcuffs to their ground rents.

One young couple in Cambridgeshire can’t sell their house because developer Taylor Wimpey originally sold it on a leasehold basis with (and this makes me so angry I AM STANDING UP AS I WRITE IT) a ground rent that doubles every 10 years for the first 50 years. Not surprisingly, banks don’t like lending on properties with this kind of structure, so buyers are put off.

I thought that leasehold (a throwback from the forelock-tugging days of feudal landlords who got an annual percentage of your harvest, your cattle and often your wife) was gradually dying out. After all, the catchily titled Leasehold Reform Housing and Urban Development Act 1993 empowered leaseholders in the same building to buy their freehold if enough of them agreed to do it. You’d think that would have started the ball rolling in the right direction.

But no. Between 1996 and 2015, the proportion of new build houses sold as leaseholds actually rose from 22% to 43% – nearly half! And nobody stopped them. Even now, there is no word of enfranchising the 1.4 million house owners across the UK who have been told to leasehold and lump it.

Why in the name of Kirsty, Phil and all the property saints is leasehold not being abolished completely in England and Wales – not just on new-builds?

After all, somehow house builders in the rest of the world seem to manage without this sweetener in perpetuity.

Britain spread the leasehold sickness across its colonies in the days when the sun never set on the British Empire without asking permission first. But that was one of the first gifts to be handed straight back when the colonies wrested power into their own hands.

Large parts of Australia, and other colonial territories, were originally leased to farmers by the government, but the leasehold element was abolished in the 1960s. In Ireland, the much hated ground rents (dating back to Cromwell) were part of the reason for the rise of the ‘Land League’ in the 19th century. Once it became a republic, the country gave leaseholders the right to demand the freeholder sell up at a relatively low price.

Even Scotland has more freedom than the rest of the UK. Legislation passed by the Scottish parliament in 2000 and 2004 effectively brought leasehold to an end there.

So what’s stopping England and Wales? Why are we, yet again, the last to join the modern world? It seems to be the fi ne line the government always feels it has to tread – as it does with banks, utility companies, and The Sun – of trying to protect consumers while keeping big business, and their own party, happy.

Already the builders’ bleetings have started, mainly from constructors of retirement villages, who insist they won’t be able to feed their children if they’re not allowed to impose ground rents on new residents. “You won’t get your housing crisis sorted if we’re not allowed our noblesse oblige,” they threaten.

Really? Well, watch this space. I’m coming to get you. Leasehold is a relic of the past and should not be allowed another lease of life. Let’s kick it out of the park for good.

Jasmine Birtles is a financial journalist and founder of MoneyMagpie.com. Email her at columnists@moneywise.co.uk.

In reply to by anonymous_stub (not verified)

Oh yes! Very good article.

In reply to by anonymous_stub (not verified)

but why do buyers not read and understand documents before they sign them, not rocket science is it?

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