Response in Parliament to Select Committee Leasehold Reform

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    Response in Parliament to Select Committee Leasehold Reform

    For anyone interested here is the transcript on parliament's discussion yesterday on leasehold reform.

    Thank you for the link to Select Committee..

    I have noticed that Bob Blackman MP Harrow East ( 4th speaker ) disclosed that Bellways CEO has told the Select Committee that it is their practice to sell the freehold to a finance company , about 6 months after site completion..


      Hi Gordon,
      There was great cross party support and general shock and outrage as the sheer scale of leasehold abuses were told.

      Think there will be a fire sale of ground rent portfolios in the near future. As one MP said - anyone who invested in this area can`t be that smart as it was obvious it would blow up one day. Greed has been the downfall.

      CMA consultation was due to end today but they have extended the deadline until Tuesday because even they did not predict the avalanche of evidence!


        Apologies for being sceptical but I am not reading the same report as you, this is nothing new, there should not be shock and outrage, there has been press coverage of the abuse for as long as I can remember. There seems to be a reluctance to deal with the problem.

        “…. The Government are … probably less committed to certain recommendations for existing leaseholders”

        “The Government have accepted the recommendation in respect of new purchases, but not for resales”

        “We have not made as much progress on commonhold … the Government ought to be a bit more enthusiastic”

        “The Government … have talked about better redress, greater transparency and asking the regulators to be more proactive. We do not think that goes far enough”

        “On existing leaseholders, we still have more progress to make”

        “We are in a “we look forward to the inquiry, but we are not quite sure what we are going to do with it when we get it” situation.”

        “the Government’s response seems to be … “voluntary deals are being done with various developers” … we are concerned about the level of trust the Government are placing in the … industry”

        “the Government are being a bit mealy mouthed on forfeiture”


          Hi Eagle
          Did you read any of the link above?

          It's true there is lots of noises but the noises are getting louder and gathering momentum.
          Lord Best's report will hopefully be out this month. He wants legislation for Property Managers to be regulated and also a proper format for service charges.
          Select Committee
          Lord Best
          Law Commission
          Look - it took years for Estate Agent/Landlord legislation to come to fruition (whether we agreed with it all or not).
          Yes - lots of chat - however it is heating up and it won't go away!


            Originally posted by michelle230 View Post
            Hi Eagle
            Did you read any of the link above?
            Did you read the contents of the link that you posted and eagle2's post, Michelle?

            If eagle2 didn't read any of the link it is a remarkable coincidence that he managed to quote so many of the things that were said so accurately!

            I agree with eagle2, there does not appear to be anything new in the discussion. The issues raised were all known before investigation by this committee, and the potential solutions had already been proposed (with some being worthwhile but others being of doubtful merit (common hold being an example of the latter).

            If anything, this is an example of how slow parliament tends to be to take any positive action to introduce changes. How often are the same issues going to be discussed before changes are properly proposed and (where appropriate) enacted?
            One of the problems is that I suspect that very few MP's have a real understanding of current leasehold laws and how they affect people. They are perhaps more likely to understand how they can make money from owning freeholds and be reluctant to reduce their own potential for making profits (but that may just be me being cynical).


              Michelle - the quotes were from the Chair of the Select Committee, it is disturbing that you do not recognise them.


                Eagle2 ,

                Whats disturbing you?. That meeting was for discussing the 12th Report of fthe Select Committee.

                Lord Best report for introducing legslation for "Property Managers (PMs) " should be interesting since PMs are managing the service charge money ( supposed to be held on trust for leaseholders ) .

                But some freeholders and managing agents have been extracting huge commissions for building insurance paid by leaseholders and still getting away with it. The Housing Department have been impotent because they ( civil servants ) don't allow themselves to be involved in individual cases. This means there is no feedback of leasehold problems from the market where consumers/leaseholders have been sufferng leasehold abuse.


                  Read the final comment from the chair “the clear message to the Government today is that what commitments they have made so far do not go far enough. There needs to be further action…. a number of very key matters need addressing.”

                  Michelle seems to be getting carried away, she is giving the impression that this is a new problem which has been solved already. You only need to read this forum and the latest FTT decisions to realise that we are a long way from resolving all the problems which exist.


                    In many cases the governments response was to acknowledge the comments raised - a phrase often used elsewhere would be - “we hear what you say” . This was the response to the idea of capping existing rents . The government then went on to remind the committee of the Human Rights issue surrounding the lowering of rents

                    a ground rent is for no service - that is clear when the lease is read . Therefore it is an integral part of the consideration for the flat - the lessor wants say £250k for the flat and an ongoing stream of income of say £350 per annum. Those terms are shown clearly in the lease and the lessee is represented by professionals in the buying process. The lessee then agrees those terms in writing having been so advised

                    It does seem profoundly inequitable that the terms of consideration agreed should be lowered years later by having the rent reduced from £350 to £250 because some other lessor introduced 10 year doublers on properties miles away .it is then proposed that no compensation be paid for that reduction

                    the root of all this is the failure of buyers to consider the fincial burden imposed by the ground rent - if the rent had been £5000 per annum purchasers would have woken up and ensured that the price they pay for their flat reflected such a high rent - however when a rent is say £250 - £350 nobody gives it much thought in the middle of a transaction and the rent goes unchallenged

                    I think the initial rent should stand and if it rises in line with inflation it should also stand - if it rises by an amount greater than inflation it could be argued that the vendor slipped in such a clause knowing it would get overlooked and perhaps in those cases there should be some redress

                    if the initial rent is to be lowered going forward then why should compensation not be paid ? Can anyone articulate an argument to support such a proposition ?


                      sgclacy - what service is the landlord providing in exchange for the payment of ground rent?


                        Ground rent is just one point but it would not make my top 10 list of priorities when considering Leasehold Reform.


                          Originally posted by eagle2 View Post
                          sgclacy - what service is the landlord providing in exchange for the payment of ground rent?
                          None whatsoever - and the lease will show that to be the case that the landlord does not need to use the ground rent towards services

                          when a lease is granted the landlord has the choice as to the amount of premium he seeks and the ground rent. If he takes a very large rent - mainly in commercial property deals - he will get less of a premium and will get the greatest premium of he seeks only a peppercorn

                          therefore when the landlord sets out his proposed terms as to the premium and the rent it is for the purchaser to negotiate on those terms

                          as as I said in my earlier post ground rent is an integral part of the overall consideration the landlord seeks and the value of this stream of income he wishes to reserve needs in my opinion to be valued using a prescribed discount rate so the purchaser can make an informed choice ie the Net Present Value of the rent should be disclosed


                            Originally posted by sgclacy View Post
                            as as I said in my earlier post ground rent is an integral part of the overall consideration the landlord seeks and the value of this stream of income he wishes to reserve needs in my opinion to be valued using a prescribed discount rate so the purchaser can make an informed choice ie the Net Present Value of the rent should be disclosed
                            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?


                              More precisely the net present value of the ground rent.


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