Labour MP and leading leasehold reform activist Justin Madders has secured a second reading of a Bill that aims to introduce a compensation scheme for existing home owners suffering from unfair leaseholds.
He described leaseholds as a “scam”, with possible compensation being the “PPI of the house-building industry”.
He said the recent Government consultation – which suggests limiting ground rent charges and stopping sales of new-builds as leaseholds – would help new buyers, but said more needed to be done for existing home owners stuck with unfair leaseholds.
Madders, deputy chair of the All Party Parliamentary Group on Leasehold Reform, said developers and freeholders made it too difficult and expensive for home owners to buy a lease, particularly where it is sold to offshore companies. He also pointed out that this also made it more difficult for a home owner to sell their property if their lease was unfair.
Madders said his Leasehold Reform Bill would introduce a statutory pricing model for purchasing a leasehold at no more than ten times the ground rent.
Such a system would involve a simple formula based on ground rent and number of years left on the lease along with a cap, he said.
He said a compensation scheme should also be set up to cover where misleading particulars have led to an unfair leasehold.
He said developers, freeholders, finance companies and conveyancers should be held responsible.
Madders said: “We need similar process to PPI for those who have fallen victim to this scam. We need to give people the chance to fairly escape that trap.
“This Bill may help in that process.”
MPs in the debate were asked to vote on the issue and all gave it their backing. A second reading is scheduled for February 2.
Banks have paid out £28.2bn in compensation for the PPI scandal since January 2011, with the deadline for claims now August 29, 2019.
It is not known what the bill for mis-sold leaseholds could be.
A feature of the PPI scandal was the number of ambulance chasing claims companies that emerged.
Sebastian O’Kelly, of campaigners the Leasehold Knowledge Partnership, backed the Bill, and said previous redress schemes announced by individual house builders were either “incoherent or inadequate”.
O’Kelly told EYE yesterday evening: “Madders is absolutely right that this needs statutory intervention. I don’t think the Bill will be as high as PPI but it has caused at least 100,000 properties to be blighted, according to Nationwide figures.
“The aggravation and grief would however exceed the PPI scandal.
“Most people who unwittingly purchased PPI insurance on their credit card will have been inconvenienced but the leasehold issue is a different scale of grief.”