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.