MP backs help for homeowners stuck in leasehold limbo

Formby MP Bill Esterson is backing a Private Members Bill that would help homeowners in the town escape crippling fees linked to their status as leaseholders.

Mr Esterson first raised the issue of leasehold after residents of Formby’s Bellway estate, Orchid Meadow, approached him for help after finding that their new dream homes came with expensive constraints.

On top of paying the freeholder, the “landlord”, a yearly fee, which increases annually, if any resident wishes to sell their home, build an extension or even change the front door or carpets, they must ask the permission of the landlord and may even have to pay an extra fee.

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The home owners were informed when they purchased their properties that they would be able to buy their freeholds at a later date, but they then found the freeholds sold off to a third party who they have found next to impossible to contact.

The private members bill, introduced by Labour MP Justin Madders, who represents Ellesmere Port and Neston constituency, would introduce a simple and fair scheme, with a clear and transparent statutory pricing model, where the amount for a leaseholder to purchase their freehold would be capped at no more than ten times the annual ground rent.

The Bill would also ensures that a leaseholder would not have to pay the freeholder’s costs just to enforce their own rights under the lease, and would establish a new compensation scheme for those who have been misled into leasehold agreements.

Mr Esterson, the MP for Sefton Central, said: “This really is the housebuilding scandal of current times, as people who buy newbuild houses are forced into this situation where they don’t even actually own their homes but “rent” them from the freeholder, the landlord, for 999 years.

“There is an annual charge and if they want to make any changes they have to pay even more to the landlord, and although they were told when they purchased their properties that they could buy the freehold at a later date, many are finding getting clarification on this impossible as the freeholds, which were initially owned by the developer, have now been sold on to opaque third parties who are almost impossible to contact.

“Homeowners are left in limbo because they feel powerless as to whether they will ever be able to own their freeholds and, if they don’t, if they will ever be able to sell their homes.

“This Bill is really important because although the Government recently consulted on banning leaseholds for new properties, it was unclear what would happen to those already trapped by them, or who may have been mis-sold them.”

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 private system currently in operation. Similar legislation exists in Scotland, Northern Ireland and a number of other countries.

A Government consultation, “Tackling unfair practices in the leasehold market”, closed on September 19 last year 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 experienced by existing leaseholders. 

Mr Madders 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."

PIC shows: Bill with residents of Orchid Meadow in Formby who are affected by the leasehold scandal