This guest blog by Mick Platt, Director at Simarc Property Management Limited, is his response to a piece by leading property legal expert Nigel Read’s piece for The Negotiator: What does the future hold for leasehold properties.
The leasehold debate is dominating the housing agenda right now. Headlines on the quantity of onerous leases are leaving consumers feeling anxious, concerned and ‘trapped’ in a system that is failing to provide proper education to buyers on leasehold implications prior to making an offer.
An onerous lease is one where the ground rent doubles in a fixed manner more frequently than every 20 years. Reports suggest around 100,000 homebuyers are trapped in their own home, suffering from spiralling ground rents. However, a comprehensive analysis of the market conducted by specialist property firm, Winckworth Sherwood LLP, sheds a whole new light, on a whole new story.
The reality is far from what has been reported and there are in the region of only 12,000 onerous leases in the market, out of a total of 4.5 million leasehold properties in England and Wales.
Action is required to remedy this situation, but we cannot lose sight of the fact that this is a tiny proportion of the market, equating to just less than 0.3% of all leaseholds.
And this figure will only fall as Taylor Wimpey and other housebuilding companies draw on new measures to provide compensation for those residents who hold these leases. Additionally, it is estimated that over 66% of these residents already have access to a scheme or the ability to vary their lease and by working closely with policymakers, we are confident this can be pushed close to 100%.
The 14-point pledge
This level of inaccuracy raises serious questions about evidence-based policymaking. The Government’s proposal to eliminate ground rents entirely and move towards a commonhold structure is based on flawed logic. Why throw out a system that is working well in 99.7% of cases? Surely regulation would be a better way forward.
Industry has already demonstrated a strong appetite for reform. In March of this year, 40 house builders and developers signed up to a voluntary 14-point pledge that has been designed to end the practice of onerous leaseholds.
As a contributor to the government-backed leasehold Pledge, we are aiming to create a fairer system for all current leaseholders and improve leasehold terms for new homeowners.
The pledge ensures that new homeowners, when purchasing their homes from developers, will not be offered a leasehold agreement with onerous clauses.
It will guarantee that legal advisers and developers are transparent with prospective buyers and that leaseholders have greater access to information throughout the buying and selling process.
This is the first step to establishing a legally enforceable Code of Practice made mandatory by the Government and regulated by an independent body.
The lack of regulation in the market has put the leasehold tenure under intense scrutiny. Scrapping the current system and forcing residents to take on joint-ownership and management of their own developments, as well as potential responsibilities for building safety, under current Government proposals, runs the risk of increased conflict.
The role for that ‘accountable person’ then becomes far more complex. This is when a professional freeholder as a steward of project and property management is imperative particular as freeholders are able to make those difficult decisions on behalf of leaseholders, which allows them to enjoy their home in peace.
Policymakers and the industry need to move away from myths and focus on professionalisation of the sector through regulation.