Leasehold and Commonhold Reform

Debate between William Wragg and Mark Tami

Thursday 21st December 2017 Westminster Hall

[Mr William Wragg (Hazel Grove) (Con)]

It is a pleasure to serve under your chairmanship, Sir David, on this, our last day of term. I congratulate my hon. Friend the Member for Worthing West (Sir Peter Bottomley) and the hon. Member for Poplar and Limehouse (Jim Fitzpatrick) on securing this debate. As I am sure my hon. Friend the Member for Witney (Robert Courts) will agree, it was a worthy application when it came before the Backbench Business Committee, of which I am a member.

We all agree that there is a need to promote fairness and transparency for the growing number of leaseholders. Historically, leasehold arrangements have been used primarily to manage properties that share a single space and have shared facilities. Where leasehold is used in properties such as flats, it often makes sense, so that there is a collective responsibility for the upkeep of roofs, lifts and entrance areas, and so on. However, as we all know, an increasing number of new build homes are now being sold on leasehold terms when there appears to be no obvious reason why the freehold is not also sold at the point of sale, other than to create an additional revenue stream for developers.

The number of leaseholds, as we have heard, is growing rapidly. While leaseholds may be presented as a cheaper option than buying the freehold, it is not always clear to the leaseholder what additional medium and long-term costs they may face. There are terms of some leases that are becoming increasingly onerous to those purchasing the leasehold for a flat or a house, and they can often expose home buyers to unreasonable and long-term financial abuse.

[Mark Tami]

I have also been made aware that when a number of people bought these properties, they were encouraged by the house builders to use a certain firm of lawyers that, shall we say, may not have fully pointed out some of the potential problems when purchasing a leasehold property.

[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.