/ Home & Energy

Is it time to loosen the leash on leaseholds?

Model homes in grass

Earlier this month the OFT confirmed its market study on ‘residential property management services’. But why could this innocuous sounding study be such important news for millions of consumers?

Well, the OFT’s inquiry is actually about the perils of owning leasehold property; something that affects many millions of English and Welsh consumers (leasehold as a form of ownership does not exist in Scotland, nor in any other EU nation). It’s such a complex area of law for consumers to navigate that the Government funds the Leasehold Advisory Service to support people with help and advice.

The Leasehold Knowledge Partnership estimates that there are currently more than five million leasehold properties in England and Wales which must mean there are many more millions of consumers affected.

And it is a growing sector: latest statistics suggest that around 40%, and an increasing number of new build developments, are sold on a leasehold basis. The number of consumers living in or owning leasehold property can only rise in future.

As leasehold property is often a flat in a larger block or new development, it isn’t surprising that first time buyers are particularly affected, especially in London and large metropolitan areas where house prices are very high. But owning leasehold property also affects other groups too.

Leaseholds vs Commonholds

These groups include anyone who has either exercised their right to buy their council home or has bought a former council property that is a flat or has shared estate facilities. We’ve been campaigning behind the scenes to ensure the market study covers these groups too – and the OFT has responded positively to our requests. Another affected group is older people living in sheltered retirement housing, a sector the OFT has already investigated.

So what exactly is the scope of the inquiry? We’ve asked the OFT to consider the ‘legal framework that underpins freehold and leasehold arrangements in England and Wales’. In other words, why property in England and Wales is still built and sold as leasehold when there is a more consumer friendly alternative – Commonhold. Commonhold has been a legal form of property ownership since 2004; in the 10 years since it is estimated there are just 100 commonhold properties in the whole of England and Wales.

The OFT has decided to focus its study on whether managing agents and freeholders have the same interests as leaseholders, whether leaseholders have sufficient influence on decisions taken by freeholders and whether there are barriers to switching.

It’ll also be looking at whether it works well in practice when leaseholders exercise their right to manage their own properties.

We’d like to hear your views – the pros and cons – of living in and/or owning leasehold property; we’ll be submitting your comments to the OFT in any additional response we make.

Comments
Member

Having been a leaseholder for the best part of 28 years, every year I receive my maintenance bill, I always have to ask for an itemised bill!
There are 22 dwellings in the block, and only 5 are leased.
Any charges are split ie. 1×22.
I live on the ground floor, but have to pay the charges for the cleaning of the stairway to the 1st floor dwellings. I once offered to do the job for half the price they were charging, but my offer was declined.
I dread the day that the roof needs renewing!

Member

Our detached house was leasehold which we bought for the then substantial sum of £600 over 20 years ago.
We cannot see any advantage to leasehold for a standard self contained terraced,semi or detached home. In fact we are glad that we own the land and don’t have any restrictive covenants, need to refer to someone else about our own home?
Buy the house and land, keep it simple,

Member

After living in freehold houses for 35 years, I down sized and moved to a flat in a converted former hotel building, 3 years ago. I never expected to have to put up with continual demands for money from the Managing Agents which they were unable to substantiate. I have take a stand with the latest demand which I have refused to pay, as it includes an item I do not have, (solar energy maintenance charge which only applies to the new build flats on the estate), the electricity estate bill is 3 times the amount for previous years, and an increase in Managing Agents fees of 45%. We have only had one meeting of residents in 3 years, and the Managing Agents refuse to let us set up representatives for the flats, because they say they cannot do it until all the flats are sold. 2 out of 51 remain unsold. Managing Agents seem to think they can charge you what they like, and then threaten you with Court Action or Bailiffs if you don’t pay up.

Member
David says:
28 March 2014

Hi Graham,
I suggest that you look at the Leasehold Advisory Service web site. There is lots of information on there which is very useful to leaseholders in explaining their legal rights. It tells you about setting up a Residents Association. From experience I know that, whilst it is always a battle when dealing with “Management”, an association with a combined voice can make a difference.
Good luck, David

Member
Graham H says:
28 March 2014

The freeholder seems to hold all the aces and leaseholders have none. It can be a pain to get leaseholders to form a common view on anything relating to the property overall, and often it falls to a few key individuals to fight the freeholder to keep the building properly maintained and serviced at fair and reasonable costs.

As an individual freehold property owner, you have, within legal boundaries, the sole right to decide when works ned to be done and how.As a leaseholder you are one voice amongst many other leaseholders, many of whom will have different issues than yours. And then you also have the freeholder whose interest may be completely different. Getting the freeholder out of the way and having only other leaseholders to deal with would be a good first step. But Commonhold has gone nowhere since it was made available, which suits property companies!

Member
John Chappell says:
28 March 2014

As a Chartered Surveyor managing approximately 100 leasehold residential properties, we always send out detailed invoices showing breakdown of costs, which are based on the wording of the Leases, which normally means actual expenditure, rather than a figure plucked out of the air. The only addition to these costs is where specified in a Lease that a management charge of x% of maintenance expenditure incurred should be charged.

However, there are local developers, even here in Skegness, building leasehold new properties who have clearly used Hans Christian Andersson to calculate their annual charges, which have no basis in fact and never fails to amaze me how many people just stump up these convoluted bills without question. They are of course, not Chartered Surveyors !

I would be very happy for the OFT to look at the whole scenario with the same force as insurance and LIBOR mis-selling scandals because millions are being ripped off by unscrupulous builders who have no idea what “an honest day’s work” means. I am not all for the Leaseholders and act only for Landlords but I am all for fairness, openness and honesty.

Member
Philip Moss says:
29 May 2014

John,
Regretfully you are one in a million. This is what we should have in every walk of life,integrity, fairness openness and honesty. It needs two or three leaseholders to get the ball rolling so that
the individual flat owners control the upkeep of the block, using agents where necessary.
That said I have come across some leaseholders management companies who do not believe
in the principles mentioned by John, and it is extremely difficult to get every one to demand that they do..How do we get people to be involved even when their home/investment is badly managed ?. As an indication of general apathy ,
in the recent Euro Elections only one third of us voted, so much hot air over UKIP when only 10% of those eligible to vote, voted. for them. We seem to have lost the ability/desire to get involved.

Member
skittykat says:
28 March 2014

I have lived in a leasehold flat for almost 30 years. It is a third of a Victorian property and we all share the bills, although there is an admin charge of £1,250 per year also shared between the three flats. About seven years ago I extended my lease back to 99 years (the freeholder would not allow me to extend it more). Since then I have realised that I could have extended it further and ended up with a peppercorn rent. I am thinking of going along this route now although I have 90 years left on my lease and could do without the expense and have no idea how much it could cost me. I wonder if I should do this sooner rather than later. Does anyone have any ideas. Many thanks.