MPs have demanded urgent reform to England’s leasehold system, claiming it is flawed and leaves homeowners at risk of exploitation.
In its report, the Housing, Communities and Local Government Committee (HCLG) says the current system is too heavily weighted against leaseholders and that key elements of leasehold mean it is open to abuse by developers, freeholders and managing agents.
And it has called on the Government to introduce legislation to remove onerous ground rents in existing leases. Some leaseholders who have bought new-build homes only discover once they are in their home that the ground rent to be paid annually to the freeholder can more than double, leaving them out of pocket and also unable to sell the property on.
Call to probe mis-selling
MPs on the committee have also demanded that ground rents on new leases have a peppercorn value, while they want the Competition and Markets Authority to investigate mis-selling in the leasehold sector.
MP Clive Betts is chair of the committee. He said: “We found that the leasehold system often fails to provide an effective system for managing multi-occupancy residential properties and believe that a commonhold model would be more appropriate in most circumstances.
“In the worst cases, people have been left trapped in unsellable and unmortgageable homes, needing permission or having to pay high fees for even minor cosmetic changes.
Buck stops with leaseholders
“Financially, the buck always seems to stop with the leaseholders, and there is little they can do about it.
“There are some practices that should stop outright. There is no reasonable case for a house to be sold as leasehold. In other areas, such as ground rents, service charges and dispute mechanisms, the Government needs to tip the balance back towards leaseholders.”
There are around 4.2 million leasehold properties in England and Wales, the majority of which are flats. The Law Commission is carrying out a review of the system, while the Government has promised that it will outlaw the practice of selling new-build houses as leasehold.