Businesses respond to select committee call for leasehold reform
Following the publication of the Housing, Communities and Local Government Select Committee report into reforming the leasehold system, we spoke to Alan Robinson of Robinson Jackson and Joe Darragh of Mandale Group, both businesses within the sector, and MP Bob Blackman to assess their responses.
Bob Blackman, MP for Harrow East and member of the select committee, urged the government to reform the current leasehold system, labelling it fundamentally “broken.”
Stating that voluntary codes could no longer be relied upon, Blackman urged the government to introduce legislation to ensure “fairness.” His full comments can be found here.
Alan Robinson is the co-founder of Robinson Jackson, an independent estate agency with over 25 offices across London and Kent.
"In the case of the recent trend for developers to sell their properties as leasehold, I have no doubt that increasing profit is at the foundation of this decision".
Responding to the findings of the committee, Alan echoed the committees description of lease charges as “onerous” and projected that freehold would eventually eliminate leases, either with or without supporting legislation.
He told us that: “In the housing market it’s never bad to reflect on the past in order to get to the heart of a current problem.
"In the case of the recent trend for developers to sell their properties as leasehold, I have no doubt that increasing profit is at the foundation of this decision.
“As far as I can see, there is certainly no benefit to the buyer and even less when they come to sell the property.
“For the majority of our 50 years at the forefront of selling both new and established property in Kent and south east London, only flats and maisonettes have been leasehold. Even in these instances, the leases would run from 99-199 years with peppercorn ground rent. This ensured good resale values.
“In these instances, management charges are set at reasonable levels to ensure the good running of the building: 12 owners within a building sharing the bills for the cleaning of communal areas, gardening and other services.
“The present move towards developers selling houses leasehold is onerous to say the least and, in my opinion, will turn in on itself soon rather than later, legislation or not. The choice between selling a freehold house vs a leasehold house – no contest!”
Joe Darragh, Director of the Mandale Group, struck a balanced tone, calling for some continuity in the way the sector operates while backing considered regulation.
The proposed cap at £250 per unit that does not allow for inflationary increases is, in our view, short-sighted. Many leases are over 250 years long – £250 in 1769 is worth approximately £1.50 today.
He told us that: “It is our opinion that new apartments should remain as leasehold properties, but the current system needs to be regulated in the correct manner.
“Property value should play an integral role in any leasehold regulation. The current system allows for correct maintenance and regulation of apartment blocks; an important issue that should not be overlooked.
“It is imperative that the government doesn’t take a blanket approach to this issue; 0.1 per cent of the value of a block of apartments in a lower value area is significantly smaller than a comparative block in a major city.
“Very low ground rent income could leave freeholders unable to implement enforcement action if required. The proposed cap at £250 per unit that does not allow for inflationary increases is, in our view, short-sighted. Many leases are over 250 years long – £250 in 1769 is worth approximately £1.50 today.
“If a new apartment block is sold with a peppercorn ground rent, or as a commonhold, it leaves significant liabilities surrounding the maintenance and regulation of the building. Collecting funds for maintenance of a building without a freeholder in place could become very difficult.
“Conversely, new build homes should always be sold freehold, and as an organisation we have always done this. It is unnecessary to add another layer of ownership to a new build home when there are no shared responsibilities over the ground which it sits.
“The leasehold review is not all bad news. We concur that the lack of regulation over excessive charges and permission fees needs addressing. Any legislation that provides clarity is welcomed.”