A straightforward, cost effective and fair system should be established for the owners of leasehold houses to purchase the freehold of their home, an MP will propose in a new Bill. The system would also apply to the owners of flats where a majority of leaseholders within a block wish to purchase the freehold.
The new system would be based on a simple calculation, with a cap on the total paid for a freehold and would replace the lengthy, complicated and expensive system of enfranchisement currently in operation. Similar systems exist in Scotland, Northern Ireland and a number of other countries.
The new Bill, being introduced by Ellesmere Port & Neston MP, Justin Madders also seeks to establish a new compensation scheme for those who have been misled into leasehold agreements and to change the rules around the award of costs in Property Tribunal cases, which Madders claims are “unfairly weighted in favour of the freeholder.”
The Leasehold Reform Bill is to be introduced through the ‘Ten Minute Rule’ procedure, which allows an MP to make their case for a new law. The process will start with a ten minute speech by Justin Madders in the House of Commons on 7th November 2017.
The Government consultation, “tackling unfair practices in the leasehold market” closed on 19th September and proposed a number of measures including banning the sale of leasehold houses in future and limiting the ground-rent levied on other leasehold properties.
While Mr Madders, who is also the Deputy Chair of the APPG on Leasehold Reform, welcomed the Government’s proposals, he expressed concern that they did nothing to address the issues being experiences by existing leaseholders.
Commenting, Justin Madders MP said:
“Abuses of the leasehold system have made huge profits for developers, while causing misery to thousands of people. Many owners of leasehold houses were led to believe that they were buying their dream home, but instead they were providing a revenue stream for an offshore company operating from a tax haven.
“While I welcome the Government’s proposals, they do nothing to address the injustice that current leaseholders face, many of whom feel trapped in properties with escalating ground rents because of the complexity and expense of the current system for purchasing freeholds.
“The current system allows freeholders to delay and put off people who want to buy their freehold. The whole process is extremely costly, archaic and lacks transparency. Great expense is also incurred in just proceeding to a Tribunal to purchase the freehold due to the practice of freeholders using surveyors and lawyers to argue for unrealistically high costs to purchase the freehold. The system I am proposing removes the opportunity for them to do that: by creating a simple formula set out in law to purchase a freehold there will be no need to resort to expensive and time consuming tribunals.
“There have been some examples of poor practices by both developers and solicitors and in those cases, there needs to be some form of redress that does not rely upon the victims handing over thousands of pounds in legal fees.
“I hope that MPs from all parties will back these reforms, which would make a huge difference to large numbers of their constituents.”