Major developers including Bellway, Redrow and Taylor Wimpey have been ordered by the Housing Minister to halt future sales of leasehold houses following pressure from Ellesmere Port & Neston MP, Justin Madders.
The exchanges took place in a debate in Parliament, which was secured by a number of MPs, including Justin Madders, who represent areas where a large proportion of properties are now sold on a leasehold, rather than a freehold basis.
Describing controversial practices by developers including hiking of ground-rents and selling on of freeholds to third parties as the “PPI of the house building industry,” Mr Madders also called on the Government to ensure that existing homeowners are compensated. When the Housing Minister, Gavin Barwell MP indicated some developers were no longer going to continue selling leasehold properties, Mr Madders said:
“It is welcome that this practice is not going to continue, but my constituents are anxious to know what the Government can do to deal with the onerous conditions that exist in leases already.”
The Minister agreed and raised the possibility of compensation for those already affected.
“We are very clear that it is not just a matter of stopping this practice; we must also address the situation of hard-working people who believe that they have bought their home, but who may find themselves unable to sell that home further down the line.”
During the debate, Justin Madders set out the case of one Ellesmere Port resident, who bought a Bellway home and was told the freehold would cost £3,750 to purchase. However, when the freehold was sold on to a third party, Adriatic Land, they found that the price increased to £12,750.
In another extreme case, he set out the case of a constituent who will see the ground rent on their home doubling each year, rising to £11,000 a year by the middle of this century, with a potential liability for payments stretching in millions of pounds. The debate also drew attention to numerous other abuses in the leasehold sector; including:
• Purchasers who felt they had been put under pressure to appoint solicitors recommended by the developer,
• Excessive service charges,
• 40% insurance commissions,
• Charges rising to thousands of pounds for consent to carry out home alterations,
• Manipulation of leasehold valuation tribunals, and;
• The forfeiture of homes by leaseholders who battle freeholders.
Commenting after the debate, Justin Madders MP said:
“Thousands of people in this area feel that they have been misled and ripped off by major developers. While the comments of the Housing Minister yesterday were very welcome and represent a good start, I will not rest until this scandal has been fully resolved.
“The developers and freehold companies behind this knew exactly what they were doing and the impact that it would have on the individuals involved. In my view they have ruthlessly taken advantage of a lack of regulation to exploit people and this cannot be allowed to continue.”