The Guardian newspaper has today reported the Blythe Court ground rent scandal that has left leaseholders with bills of up to £8,000 a year.
In 95 years the ground rents can reach £8 million a year for a one-bedroom flat bought for £58,000, says the article, written by Guardian staff reporter Rupert Jones.
It quotes leaseholder Kadian Kennelly describing the practice as “simply scandalous”, acknowledges the role of the Leasehold Knowledge Partnership in highlighting the issue and quotes MP Sir Peter Bottomley.
LKP’s full reports on this issue can be read here
The article can be read here: https://www.theguardian.com/money/2016/oct/22/small-print-ground-rent-property-millions-leasehold-flat#comment-85948167
It reports Sir Peter’s Early Day Motion calling on auctioneers Allsops to remove 1, Blythe Court from sale in January this year. It had similar ground rent terms to Miss Kennelly’s flat.
In a separate comment article entitled “Property is theft? Well, leasehold certainly is”, Guardian Money editor Patrick Collinson addressed the general issues of leasehold.
He referenced housebuilders building leasehold houses, now thought to be around 6,000 a year according to the DCLG.
The article can be read here: https://www.theguardian.com/money/blog/2016/oct/22/leasehold-property-ground-rent-no-ethical-basis#comment-85953791
Collinson writes:
“No wonder financiers love this stuff. Bundle up loads of ground rents, create a fund effectively paying 7% and you can sell it for twice the price you paid, because even a 3.5% yield is attractive these days. And all for doing absolutely nothing. Ground rent is almost the definition of a socially useless activity.”
The Leasehold Knowledge Partnership is quoted: “Freeholds represent 5% or less of the capital value of a block of flats yet have a preponderance of the power. That does not make sense, even capitalistically … a tough monetising property spiv should get a 20% annual return on a freehold.”
And LKP’s solution is also referenced:
“New leases should be indefinite; ground rent should be abolished; all flats should be built with residents’ management companies, so the residents take control once a majority of the flats are sold.”
There appears to be many companies who are clamouring to purchase Ground Rents, so they obviously provide a very lucrative business. Particularly when Bank interest rates are so low.
And then there is the opportunity to charge enormous sums for granting lease extensions.
It is a subject little understood by many purchasers of leasehold, particular the elderly, and they can be easily taken advantage of.
Well done to Campaign against retirement leasehold exploitation for highlighting the problem.
Can Campaign against retirement leasehold exploitation lobby the 650 MPs in Parliament to propose abolishing the ground rent system for all residential leasehold property because its become a “scam” for spiv directors operating ground rent investment companies ?.
Theresa May did say she would make “brexit ” work for everybody. Why hasn’t the Council of Mortgage Lenders declared 10 years ground rent increases as an unfair contract term and do not qualify for mortgage loan .