Chris Blythe: time to fix the leasehold rip-off

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  1. Thank you for this article. As a leaseholder affected by this outrageous greed of the developers I feel trapped. I have set up a facebook page called “National Leasehold Campaign” which now has almost 1,000 members who are in disbelief this has been allowed to happen. This is our homes, our futures that developers have sold…

  2. As a professional practice we too have seen property companies selling new leases with escalating ground rents far in excess of the traditional nominal sums. Higher ground rents are more cost effective to collect and a valuable asset when capitalised.

    The higher ground rent can easily be valued.

    The answer for the purchaser is to offer less for a property with a high and escalating ground rent than for a property with a nominal ground rent.

    Our immediately post-university children purchasing a flat in south-west London had the option of purchasing very similar flats, one with a peppercorn ground rent and a share of the freehold, or the preferred flat with a high ground rent escalating every 25 years. The difference in ground rent was valued at £20,000, so the successful bid was made accordingly.

    No rip-off. The landlord received a lower capital sum, but retained the benefit of the ground rent income as part of a large portfolio, which could be sold on the open market, or acquired by the lessees under existing legislation, i.e. by seeking a new long lease at a peppercorn ground rent and buying out the existing ground rent provision.

    The answer is to seek advice and pay the right price for the property taking into account its benefits and disadvantages.

    Richard Birchall

  3. Richard, you have cited one example where it might be argued that the deal is reasonable. In the vast majority of cases it is not and homeowners are falling victim to sharp practice in their thousands. The leasehold market can make a property worthless and it is a little known and understood process for any ordinary purchaser and many conveyancers. This campaign needs to succeed.

  4. Richard. This may be true in an isolated case where the seller was willing to negotiate however this is rarely the case, particularly with new builds with Persimmon, Bellway and worst of all Taylor Wimpey.
    These developers’ solicitors drafted these onerous and well hidden clauses and sold the freehold on to offshore pension funds who can quote any price to protect their income streams and even after mutual negotiation it is still a large but unknown capital sum when the property is purchased. No transparency of contract and no future idea of the capitalisation value!

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