Does The Leasehold Pledge Adequately Protect Leaseholders?

In March, 40 house builders and developers signed up to a voluntary 14-point pledge designed to end the practice of unfair and onerous leaseholds, with many house builders committing themselves to the pledge, including the Home Building Federation.

In the last ten years, numerous leaseholders have expressed their feelings of anger and desperation due to being imprisoned in a system that has completely failed at making sure buyers understood leasehold implications before making an offer on a property, doubling their ground rent every decade and asking for needless permission fees at any point the homeowner wanted to make changes to their property.

Director at Simarc Property Management Limited, Mick Platt, who appeared in front of the Government’s Parliamentary Select Committee last year to talk on the issue, and was an instrumental contributor in the formation of the recently announced government-backed leaseholder pledge, took the time to discuss the pledge with Today’s Conveyancer about how it creates a fairer system for all leaseholders in the future.

Our experts shared their views on the pledge and whether they think it adequately protects leaseholders, and is transparent enough to ensure all future prospective buyers are properly educated to make an informed decision.

Philip Bullivant, consultant to PM Property Lawyers said:

“Whilst any move which takes away the unfair “rent doubling” developer leases is to be welcomed, the Developers Public Pledge falls a long way short in addressing the real issues surrounding developer leasehold arrangements.

“The matter of unreasonable permission fees demanded by managing agents is not addressed. The substitution of an RPI rent review clause for a “rent doubling” clause is a poor solution within a new residential lease. A fixed rent for the whole of the lease term or with pre-defined increases would be more equitable, i.e. a 99-year lease with fixed uplifts at years 33 and 66. The Pledge and the comments of the Director of Simarc Property Management Limited hint at “standardisation”, surely a pointer toward Commonhold and away from Leasehold?

“Lastly, in the 14 point pledge while there is mention of ” identifying”, “assisting” and “supporting” and being “fair and transparent” there is no reference to legal costs nor any allocation of the liability for the payment of such costs.”

Paul Sams, Partner at Dutton Gregory Solicitors

“Although I have stated on record before, to my detriment on occasion, that the whole situation regarding ground rents has been blown out of proportion, the Leasehold Pledge is a great PR exercise for those who have signed up to the same.  In reality very few of the many leasehold properties that exist have onerous provision but like in any walk of life the exceptions to the rule are the ones that come to the fore.

“Developers ceasing to create leasehold houses purely so they could sell the benefit of ground rent had died a death in any event as consumer simply rejected them.

“The concept of ground rent has been around for hundreds and years and simply won’t disappear overnight and quite rightly so. I do though agree with the comments with the misnomer that RPI increases solve all problems, if RPI increases significantly in the future then people will crave doubling ground rents as they will be cheaper.

“Personally, from the Conveyancing industry’s perspective, I think it would be far better to concentrate our ire on the managing agents who charge ridiculous administration fees for providing replies to LPE 1 enquiries which when answered are so generic they could apply to any property, not the one being sold.  If managing agents were controlled more strictly (and a lot are excellent so don’t think I am aiming at all here) then those who see anything extra to looking after the buildings in their care as a mass revenue generating exercise could be brought to heel more effectively”

As a conveyancer, do you think the pledge adequately protects leaseholders? Is it transparent enough?