Response in Parliament to Select Committee Leasehold Reform

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    #16
    Originally posted by Macromia View Post

    I agree, ground rent really wouldn't be a problem if people understood it before they bought a lease.
    The price paid for a lease should be considered to be the initial premium + the cumulative total off ALL of the ground rent that will be paid between the date of purchase and the date that the lease expires (this accurately reflects the price that has been paid for the right to occupy, or sublet, the property for X number of years - with X being the remaining years left on the lease).
    Perhaps sellers should be required to declare the total as the sales price as well as stating the premium they require for passing the lease on?
    if you had a 999 year lease the sum if all the ground rent paid over the term could give a misleading value for the liability. I believe the Government should set a discount rate and put up an online calculator to help calculate the figure. The discount rate to be clearly shown

    There is a similarity to he problem faced years ago with loans and the Consumer Credit Act sort to address the problem by making lenders publish an APR. As the rent rises then the premium should fall (although when the rent is small that does not appear to happen) the price the purchaser pays for that discount is the ground rent ie a form of interest .

    Much mischief it is argued has arisen on lease extensions with ground rent terms not understood. A further refinement could be that ground rent terms can only be offered by those regulated under the Consumer Credit Act

    Comment


      #17
      Originally posted by sgclacy View Post
      if you had a 999 year lease the sum if all the ground rent paid over the term could give a misleading value for the liability....
      Yeah, I guess that's true.
      What this really comes down to is that there are too many people who don't understand what they are 'buying'/committing to, and don't ensure that they get things properly explained so that they do understand.

      Comment


        #18
        In practice, it does not work that way. A leaseholder takes on a lease in order to have the use of the flat. Tbe freeholder sets out the terms of the lease and usually intends to sell the freehold as soon as he has sold the flats. The leaseholder is told that the lease is standard and cannot be changed. I doubt very much that the freeholder calculates the discounted cash flow when he fixes the selling price. There is no obvious benefit of paying a ground rent and there is a case for always setting it at a peppercorn rent.

        Comment


          #19
          Whether it was precisely calculated in the freeholders mind i doubt save for very large house builders - but that does take away the main point which is that the rent is set out and forms part of a contract and only in the most extreme cases should human rights legislation be overridden - the danger is that tinkering with existing leases where the rent does not double every 10 yrs would undermine the general principal of contract law where terms can be expected to be capable of being relied upon

          as as I said earlier I see no reason why an initial rent should be varied or indeed a rent which merely keeps pace with inflation

          Comment


            #20
            The argument is that there is no obvious benefit for paying the ground rent and the leaseholder has little if any say in the matter. If you rent a property, you receive the benefit of the use of the property.

            Solicitors should explain the terms of leases to leaseholders. The whole system needs to be reformed.

            Comment


              #21
              The ground rent is not the problem it’s the failure to appreciate the financial significance of the obligation to pay it

              In the vast majority of cases it’s the failure of the solicitor / valuer to think about the outgoing and deciding whether the value of that burden is reflected in the price paid for the flat

              if the ground rent was very large say £5k and the property was discounted by £100k then the lessee can hardly complain at The rent

              Comment


                #22
                Dealing with ground rent is a simple matter, it can be set at a peppercorn rent or the leaseholder can be given options basef on genuine discounted cash flow. Dealing with existing contracts is more difficult.

                The real issues to be tackled are the hidden charges.

                Comment


                  #23
                  Originally posted by eagle2 View Post
                  Dealing with ground rent is a simple matter, it can be set at a peppercorn rent or the leaseholder can be given options basef on genuine discounted cash flow. Dealing with existing contracts is more difficult.

                  The real issues to be tackled are the hidden charges.
                  I agree - but I think the problem of hidden charges are easier to deal with through legislative change as they don't impinge on human rights

                  However the ideas about variations to the ground rent and the valuing the reversion impact on values and this is what will cause resistance to change. The Great Estates in Prime London will obvioulsy throw enormous sums at challenging any changes

                  Comment


                    #24
                    There is legislation already, service charges and administration charges are supposed to be reasonable but landlords and their agents are ignoring it. The problem with hidden charges is that the leaseholder is often unaware of them, he needs to dig deep to discover them.

                    Comment


                      #25
                      Originally posted by eagle2 View Post
                      There is legislation already, service charges and administration charges are supposed to be reasonable but landlords and their agents are ignoring it. The problem with hidden charges is that the leaseholder is often unaware of them, he needs to dig deep to discover them.
                      The government are proposing a limit for leasehold enquiries of £200 and many such consents could be prescribed going forward

                      Those who want change and demand that existing ground rents be capped and reduced with no compensation and lease extension at a max price of 1% of the value of the property are seeking to be provocative - purchases and sale of leasehold property in the last 25 yrs have been conducted when the price to extend or enfranchise could be calculated with some certainty - so prices paid by lessees for their interest reflected that formula - therefore why make changes - the only changes which are necessary is to make it easier and quicker and if prescribed rates were given for capitalisation and the deferment and relativity it would save on Legal and valuation fees and speed up the process- a stated intention of the government

                      i do think if the landlord acquired his interest post 1993 that he should bear his own legal and valuation fees as he bought knowing of the existence of the 1993 Act

                      Comment


                        #26
                        £200 is too much for what are usually bland replies.held on a word processor.

                        What about when the landlord charges grossly inflated prices for works carried out by connected companies?

                        what about the recent case of a landlord charging £5,000 to collect ground rent arrears?

                        Comment


                          #27
                          I've seen a solicitors' quote of £350 for doing an LPE1.

                          Comment


                            #28
                            I note that two threads in the last week have involved cases where the freeholder is the one complaining, as a result of RTMs failing to adequately manage, and, in at least one case, creating serious safety problems. The problem of management by people who not fit to manage, but are leaseholders is also a big one, seems to get little attention, although it was mentioned in the recent RTM reform report.

                            Comment


                              #29
                              I think the human rights aspect is probably already covered. Many years ago the Duke of Westminster went to the ECHR and they found that the Leasehold Reform Act 1967 did not infringe his human rights. Whilst a different issue, the court also found that the right to acquire title to land by adverse possession did not infringe human rights either. The right not to be deprived of property is not therefore absolute.

                              The argument that ground rent is part of the consideration is a bit hard to swallow. That is not how purchasers perceive it, What they look at is the premium. In practice two identical flats, one with a peppercorn corn rent and another with an increasing rent are going to have the same sale price. In any event, why the need to allocate part of the purchase price to rent for flats when it is not done for houses? The plain fact is that these days many developers are not satisfied with making their money from developing, but set up leases to provide for a nice little earner that they can sell on.

                              I can agree that conveyancers have not covered themselves in glory. What is considered acceptable has been allowed to drift. Clients are not given full advice. With rising ground rent for example the full effect needs to be pointed out.

                              Governments of left and right have addressed many of the problems, though enforcement may be an issue. The time has come to grasp the nettle and make sweepig changes because many long leaseholders are quite simply being ripped off. The problem is exactly how to go about it.

                              Comment


                                #30
                                Originally posted by leaseholder64 View Post
                                I note that two threads in the last week have involved cases where the freeholder is the one complaining, as a result of RTMs failing to adequately manage, and, in at least one case, creating serious safety problems. The problem of management by people who not fit to manage, but are leaseholders is also a big one, seems to get little attention, although it was mentioned in the recent RTM reform report.
                                We have to distinguish between management and making decisions.

                                All decisions should be made by the leaseholders collectively following the law.

                                Management needs to be professional.

                                Comment

                                Latest Activity

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                                • Sharing cost
                                  Affinity
                                  Hello
                                  I am selling my flat. In order to do so I had to pay for a asbestos certificate which cost me £400+vat.
                                  Is it fair to ask the other freeholders to share the cost? The building has three flats and we share the freehold.
                                  Your views are appreciated.
                                  19-09-2019, 16:51 PM
                                • Reply to Sharing cost
                                  leaseholder64
                                  The leaseholders are the joint freeholders! If the lease requires the freeholder to pay, there really should have been a formal agreement that freeholder costs be split equally.

                                  Is this one of these leases that tries to avoid having service charges?

                                  Worst case is that the joint...
                                  21-09-2019, 08:37 AM
                                • Reply to Sharing cost
                                  eagle2
                                  It should be a shared expense payable by the freeholders or leaseholders depending on the wording of the lease. You should try to persuade the others in the block to contribute failing which you may need to threaten legal action.
                                  21-09-2019, 08:07 AM
                                • Reply to Sharing cost
                                  leaseholder64
                                  The problem is that you failed to do this when you were required to do it That means you are now against time pressures. You are probably going to have to fund this yourself, even though it should have been a service charge item, split equally amongst all the leaseholders.
                                  20-09-2019, 21:32 PM
                                • Reply to Sharing cost
                                  Affinity
                                  Yes, it is for the communal area
                                  20-09-2019, 20:49 PM
                                • Service charge ground rent late payment - Admin charge and legal fees
                                  kads
                                  Hello All,

                                  I have a leasehold flat and have missed paying the ground rent and service charge.I wont go into the details why I missed it but have learnt a lesson that I should have been paid on time. I received an email from the Landlords solicitor demanding the money be paid to them directly...
                                  20-09-2019, 10:41 AM
                                • Reply to Service charge ground rent late payment - Admin charge and legal fees
                                  eagle2
                                  I recommend that you check carefully whether or not the demands were issued correctly. I would do nothing else unless the cheque is returned to you, which I very much doubt, The freeholder will not succeed with a claim for forfeiture. If the agent maintains that you owe monies, you will need to contact...
                                  20-09-2019, 17:02 PM
                                • Reply to Sharing cost
                                  leaseholder64
                                  Can you confirm this is for the communal areas?

                                  If so, point out that they have been committing a criminal offence for many years Also, only the freeholder can commission the survey, as it will involve taking samples not just a visual check and leaseholders won't have the right to cut...
                                  20-09-2019, 17:00 PM
                                • Reply to Service charge ground rent late payment - Admin charge and legal fees
                                  Macromia
                                  ...but will only apply if the service charges/ground rent were correctly demanded in line with current legal requirements....
                                  20-09-2019, 16:48 PM
                                • Reply to Sharing cost
                                  Affinity
                                  Thank you for your answer.

                                  Does someone know if there is anything I can do to make the other shareholders pay?
                                  20-09-2019, 16:47 PM
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