I beg to move,
That leave be given to bring in a Bill to regulate ground rents charged on leasehold properties; to make provision for a cap on ground rents; to make property developers liable for the legal costs of leaseholders seeking to vary certain ground rent contracts; and for connected purposes.
Mr Speaker, imagine for a moment that you own a lovely one or two-bed apartment with your family, or perhaps even a recently built house. You have lived there quite happily for a few years, but you decide it is time to move, perhaps because of schools, for work or to move up the property ladder. You are primed and ready to go, but the estate agent asks for a copy of your leasehold agreement and there in the small print you get hit with the fact that you cannot sell your property—you are trapped. Tens of thousands of people across the country are in this position, and it simply cannot be right. This leasehold ground rent scandal needs attention right now. In many cases, developers have created leases with feudal ground rent clauses that have since fallen out of favour with lenders, leaving owners stuck with an unsaleable property because prospective buyers cannot get a mortgage to purchase the property.
In some cases, the ground rent doubles every 10 years. In others, it doubles just once. There are reports of lenders refusing to lend on what they deem as unreasonable or onerous ground rent clauses. Some will not lend if the ground rent exceeds 0.1% of the property value at any point during the lease. Leasehold campaigners argue that there are close to 100,000 people affected by terms that leave them with a ground rent in excess of 0.1% of the property value. I would argue that such circumstances are onerous. The result is an unsaleable property and, in many cases, the developer is long gone, having sold the freehold on to a distant investment company. They have, of course, made their money twice—not only from selling the leaseholds in the first place but from selling on the freehold.
Ground rents can, of course, be peppercorn or set at a reasonable rate, and the Ministry of Housing, Communities and Local Government report shows that the market place is mixed, but it is important to clarify that ground rents have nothing to do with the maintenance of a building. They are simply an income for the freeholder. As the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for South Derbyshire (Mrs Wheeler), who has responsibility for housing and homelessness, told the MHCLG Select Committee:
“One of the things I do find utterly fascinating is that a building might be beautifully maintained at a peppercorn ground rent or poorly maintained at £500 ground rent. The amount of ground rent payable is no indication of the quality of the maintenance and services provided.”
There is nothing wrong with a freeholder taking a reasonable ground rent, but when that ground rent becomes onerous and stops someone selling their home it becomes a problem. The rights between freeholder and leaseholder need to be redressed.