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Leasehold does not need major reform, lenders tell MPs
The controversial system of ‘leasehold’ ownership in England does not need major reform, the body representing high street lenders in the UK has told MPs.
The comments from Matthew Jupp, principal of mortgages policy at UK Finance, came despite widespread criticism of the tenure from ministers and plans for radical reform.
At an evidence session of the Housing, Communities and Local Government Committee yesterday, he said there was little evidence of a ‘leasehold trap’, where people are unable to sell homes because they are difficult to mortgage.
“There’s four million leasehold properties in the country at least, and the market generally works OK,” he told the committee.
“There are people who find it hard to access mortgages but the reason for that is that there are some very poor leasehold terms out there. I think the focus should be on rectifying those. I don’t think there is a much more widespread problem than that.”
UK Finance is the lobbying voice of some 300 banks and other firms which provide finance. It was formed when the Council for Mortgage Lenders joined forces with a number of other representative groups.
The practice of leasehold involves selling a long lease, typically of 99 years, to a buyer while the land ownership, or freeholder, continues to be held by a third party.
It is typically used for blocks of flats and commercial properties but has also been used for houses, with an estimated 1.4 million among the UK’s 4.2 million leasehold homes.
The government has been working on plans to eliminate what a former housing minister described as the “unfair, unjust and unacceptable” abuse of the system by builders since 2016.
It has launched a consultation on capping ‘ground rents’, which are paid by leaseholders to the landowner at £10 per year, and banning the sale of houses on a leasehold basis except for shared ownership.
Last year the Law Commission outlined a range of measures to help existing leasehold homeowners buy their freehold or extend their lease. It has also proposed removing the requirement that the leaseholder must own a lease for two years before making an enfranchisement claim.
It has also published a public consultation on commonhold, the alternative to leasehold which allows a person to own a flat and share ownership of the building’s common areas.
Professor Nick Hopkins, a law commissioner for property, family and trust law, told the committee: “Looking at the landscape of leasehold legislation I would have to say it is not fit for purpose as it is.
“The need for reform has become much more urgent.”
There has also been controversy surrounding the removal of dangerous cladding from tower blocks, with leaseholders faced with extortionate bills for the works.
At the same committee meeting, Guy Fetherstonhaugh, a QC at Falcon Chambers, who was part of a panel of law experts, said: “The trouble with leasehold is that it is essentially antagonistic. Landlords’ and tenants’ interests won’t coincide.”
“If there is going to be reform it needs to be holistic.”
