Fury over mortgage boss’s claim that ‘leasehold market does not need major reform’

Leasehold campaigners have expressed fury at suggestions put to MPs that the leasehold market is not in need of major reform.

On Tuesday, Matthew Jupp, head of mortgages at trade body UK Financial, told the Housing, Communities and Local Government Committee that the leasehold market “as a whole works fairly well”.

He claimed that there was little evidence of a “leasehold trap” where people are unable to sell homes because they are difficult to mortgage.

He said: “There are 4m leasehold properties in the country at least, and the market generally works okay.”

But Leasehold Solutions, a firm specialising in helping people with lease extensions and freehold purchases, angrily refuted the claims.

Managing director Louie Burns said Jupp’s claims were “devoid of reality”.

He said: “The scandal of doubling ground rents affects hundreds of thousands of people who own leasehold homes. It’s not just a handful of cases – we see countless examples of leaseholders adversely affected by onerous ground rents every year. 

 “Leaseholders are also forced into paying exorbitant fees for lease extensions, service charges, and fees for licences and permissions to carry out home improvements. 

 “We also see numerous cases where leaseholders are unable to sell their property because mortgage lenders refuse to provide the prospective buyer with a mortgage due to the onerous terms of the lease, particularly in the case of new-build houses.  

 “This effectively makes those properties worthless, as the value of the property depreciates year-on-year, until, inevitably, the freeholder takes control of the asset when the lease expires, or the mortgage repayments become unaffordable due to the increased burden of doubling ground rents, at which time the leaseholder forfeits their property to the lender. 

Burns went on:  “The reality is that many leaseholders are trapped in a leasehold nightmare and urgent reform is needed.

“Contrary to Matthew Jupp’s evidence to the select committee, we are already seeing a two-tier market developing for leasehold properties, where new-build properties with zero ground rents are attractive to buyers, while existing leaseholds with onerous ground rent terms are virtually unsellable. 

 “The Government promised real action to end feudal leasehold practices and cut out unfair and abusive practices within the leasehold system. Since then we’ve had numerous consultations but precious little action to make the system fair and just for leaseholders. 

 “It is high time the Government fulfilled its commitment to reform the leasehold system.”

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6 Comments

  1. Will2

    I just wonder how these people get their influential jobs when they appear to not have total grasp of reality.  Even before the new build developers taking advantage of people many freeholders rip off leaseholders with inflated insurance renewal terms. Many big business’s are known scammers eg. the pay day loan companies. In years past they were called loan sharks due to excessive interest rates until they paid for their licenses and that somehow makes it all OK and authorised.  The leaseholder system does need significant improvement and protection for leaseholders in many instances.

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  2. johnclay

    I totally agree with Louie Burns.

    How does Matthew Jupp know that the leasehold market is working well?  Has he spoken to any conveyancers?  Does he know what a conveyancer is? His ignorance is staggering.

    Does he know that many owners of leasehold properties are facing a new scandal.  Many lenders have recently increased the minimum unexpired term that they will lend on from 55 years (as was commonly required a few years ago by most lenders) to 80 years or more.  This means that many leaseholders who bought over the last few years will not be able to sell their properties without extending the lease.  Not only will this involve considerable expense it will cause a considerable delay in the conveyancing transaction.

    There are many owners of properties with unexpired lease terms of 70 years or thereabouts who will experience this problem.  I would estimate that a majority of owners have a lease term of less than 80 years; many thousands, probably millions.

    The irony is that some lenders will have mortgages on properties that the owner will not be able to sell to a person who would like to use the same lender but cannot do so as the lender has moved the goalposts!

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    1. Paulfromromsey87

      Not to mention something that Ive only recently become aware of, which is a ground rent above £250 p.a. (£1,000 in London) automatically turns the leasehold into an Assured Shorthold Tenancy bringing it under the same rules as any other AST covered by the Housing Act 1988.  Leaseholders falling into arrears for any reason that are taken to court are treated the same as any other AST tenant i.e. the judge has no choice but to rule in favour of the freeholder giving them possession of the property.  This is nothing short of scandalous and needs to be addressed as a matter of urgency, especially in view of periodically escalating ground rents.

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  3. Benfield

    Every Leasehold flat built should have a 999 yr lease. All houses built should be freehold, unless shared areas, roads etc need to be maintained, 999 yr lease if that’s the case. Every lease extension should be same 999yrs.

     

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  4. LocalLens

    Leasehold sales getting more and more difficult to get through if buyer needing a mortgage.  Apart from the issue of length of lease left below 80 years being a problem, other issues now come into play.   Lenders may consider rising ground rent to be set on onerous terms so won’t lend.  We had that issue recently – fortunately we managed to work out that the solicitor acting for buyer had given lender incorrect information.  GR rose at set figures, but solicitor told lender it doubled every time – that’s a no no and definitely means some properties not suitable for a mortgage, hence could be regarded by some as unsaleable.   Still took about a month to sort out when we pointed out the correct information.  Anything remotely unusual is picked over to the nth degree.   Managing agents routinely take excessive time to provide management pack and answer any subsequent questions, even though being paid handsomely to provide the information.  I could go on and on…………   But its all fine!!

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  5. MsMoPo

    Not to mention the horrendous managing agents, using leaseholders as income sources despite doing minimal to no work. It amazes me how they keep tightening up every aspect of estate agents yet leave managing agents as completely unregulated cowboys.

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