abuse of leaseholders

We cannot tar all leaseholders with the same brush

When it comes to the perceived abuse of leaseholders and what might be termed a dereliction of duty over the years by various stakeholders, there might be a temptation to throw every single one collectively “under the bus”.

However, I think it’s important – particularly for the public and leaseholders at large – to consider there are varying degrees of misdemeanour and not to assume that every case is the result of an intent to deceive or to extract as much money as possible from leaseholders.

Of course, there are those who did just that – some to the nth degree – and we are still to a certain extent awaiting justice to be done here, but there are others who should not be tarred with that particular brush.

The recent case of a solicitor in Manchester who was fined £15,000 for effectively not correctly advising on the rent review clauses of various properties on a development, fits I think into the latter category. This solicitor advised clients that the properties they were purchasing would have their ground rent double every 25 years when it was actually every 10 years.

Clearly, this was going to add up to much more money to be paid by the leaseholder over a shorter period of time, and no doubt there would be those who would not have agreed to purchase if they had known this was the case.

Reading between the lines it looks like a 10-year period did elapse for one leaseholder at which point they were confronted with the fact the ground rent would be doubling and at this point complaints were made.

The case related in total to 115 clients which was a considerable number and also tends to draw into the spotlight the obvious promotion of this one solicitor by the developer to many of those buying on the development.

Plus, that being the case, you would think the solicitor concerned would have checked this rather than blindly assuming it would be the same as previous developments, when in this case it was not; and his standard report template should have been amended.

However, as mentioned above, this wasn’t a deliberate mistake, and in my view, we must distance such cases from those which are much more serious. Our industry needs to clearly keep on top of their standardisation and must ensure that every single title is checked and the correct and relevant advice is provided to every individual client.

But we must also consider the source of such an issue and this case is very different from the mis-selling of leasehold properties by the developers themselves, which led to the Competition and Markets’ Authority (CMA) getting involved in a significant number of cases and which resulted in it ensuring the major developers did promise to recompense leaseholders for the doubling of ground rents over a 10-year period being part of the lease in the first place, plus of course the cost of enfranchisement and releasing them from those clauses.

This is another level entirely and, over the years, I have been very pleased at the level of involvement the CA has had in helping overturn such clauses, particularly as a result of a survey we conducted a few years ago, the results of which showed the levels some developers were going to in order to extract money from leaseholders, the charges involved, and the widespread leasehold abuse they were conducting.

Unfortunately, while there has been some movement with regards to addressing these leasehold abuses – the introduction of a peppercorn rent for new leases, etc – there is a lot that remains outstanding, and it would be positive to see these being addressed by Rishi Sunak’s “new” Government.

I’m thinking specifically about the promise to dispel unreasonable fees for the LPE1, legislation against leasehold houses, giving managed freeholds the same rights as leaseholders, plus delivering on the Law Commission reports for commonhold, the right to manage, enfranchisement and Lord Best’s report calling for the Regulation of Property Agents.

In that sense, there is plenty still to be done. And while it is positive that justice has been done in this specific case, over the years leaseholders have suffered a great deal when it comes to those that purposefully misled them, and purposefully ensured they were not in possession of the full details or indeed were given advice which may well have resulted them in not buying a leasehold property at all.

Beth Rudolf is Director of Delivery at the Conveyancing Association (CA)

One Response

  1. Thanks Beth . Fair to both sides as ever

    I see that you are promoting wider Government involvement as an essential for improving the home moving process

    Is not the way forward for HMG to promote the conversion of all information needed by movers into open data so that they can form informed decisions? To impose a consistent standard and availability throughout property property is what levelling-up should be about.

    In 1975 I attended a presentation by Theodore Ruoff, the then Chief Land Registrar to convince practitioners of the advantages (particularly to the broken National [not Local] Land Charges Registration system) that digitisation would bring. The response was so toxic that the CLR backed down and agreed to have a personal application facility at a district land registry.

    The computerised facility came on line that year worked brilliantly from day one. The personal facility was available but unused and its staff were made redundant.

    While HMLR showed technical brilliance, I have always felt that its great failing was not promoting this success as a reason for investing its approach in other areas.

    Re-engineering local land charges looks good but has taken another half-century to get where it is. The Thirdfort presentation you participated in recently noted that change-phobia is still here.

    Had the 1975 success been followed by a prompt programme of spreading it foreign jurisdictions might be here looking at us and not the other way around

    Keep up the good work

    John Harvey

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