Leasehold and Commonhold Reform

Debate between Peter Bottomley and William Wragg

Thursday 21st December 2017 Westminster Hall

[Mr Wragg]

Indeed, the lack of transparency and information for those purchasing the leasehold is a problematic area. The hon. Gentleman is right to highlight that.

The issues that people face include: paying for ongoing and increasing ground rent, often at unjustifiable and unaffordable levels; paying arbitrary fees to the freeholder for permission to make even the most minor of alterations to a property; and the financial impact of extending the lease or buying the freehold from the developer after moving in.

Leaseholders in England will normally pay an annual ground rent to their freeholder or landlord for renting the land that the leasehold property is on. However, developers are increasingly selling leasehold properties with short ground rent review periods, often every 10 years, which allow for above-inflation rises. Indeed, there have been reports, as was mentioned earlier, that some of those rises have been doubling every decade, well above inflation. Worryingly, these terms are not always made explicit to potential home owners at the time of purchase, leaving buyers open to finding themselves in vulnerable and unforeseen positions years down the line. Even when full diligence was conducted at the time, the freehold can still be sold on later to a third party, even after residents have moved in, by legally out-manoeuvring leaseholders’ right to refuse.

[Sir Peter Bottomley]

I can quote an example where, if the people had managed to buy the freehold from the developer at the beginning, it would have cost them between £2,000 and £4,000. A year later, when they applied to the so-called long-term freehold interest—often using pension money for purchasing—they were quoted £40,000. When they objected, that came down to £30,000, but they were still left being completed shafted.

[Mr Wragg]

There was certainly an iniquity there, which needs to be resolved.

Like many right hon. and hon. Members present, I am dealing with a number of cases and complaints on behalf of my constituents. I am pleased to be able to put some of them on the record in this debate. A resident of the new build estate at Strines in my constituency informs me that he is entering the fifth year of his lease, and the prospect of his ground rent increasing is causing him a great deal of trepidation. He is paying £250 plus a £300 service charge. Along with the worry about the additional strain on his finances, he is rightly concerned at the possibility of his property becoming less attractive for sale.

Several residents of the new build Offerton Park estate tell me that property developer Bellway recently transferred the freeholds to a financial management company called Adriatic Land 6, so they are now subject to above-inflation ground rent increases every 10 years. They were not offered a chance to buy the freehold themselves at a reasonable cost.

The residents of Davies Court in Romiley, with whom I had a very enjoyable meeting last month, and who are predominantly retired, face annual ground rents of £450. That is £450 being demanded from pensioners for the ground their houses stand on. The managing agency for the building, FirstPort Retirement Property Services Ltd, also charges residents spurious administration fees when homeowners carry out improvement works, such as installing fitted wardrobes or new bathrooms, at their own expense. The company even attempted to charge one retired lady an £80 administration fee when she bought a cat. She refused to pay.

These are just a few examples from my post bag that highlight the unfair and, in places, absurd situation.