first_imgHome » News » Guest post: Critics of leasehold miss the mark previous nextRegulation & LawGuest post: Critics of leasehold miss the markLeaseholds have been painted as the villain of the cladding and ground rent scandals, but it is government inaction over many years which is the root cause.Mary-Anne Bowring, MD, Ringley Group25th November 20201 Comment721 Views Following the ground rent scandal and cladding crisis, leasehold has become almost a dirty word in the press.Yet while both issues undoubtedly exposed flaws in the system and highlighted the need for reform, mounting calls to abolish leasehold entirely usually misdiagnose the problem and fail to recognise the alternatives are no better, or often worse.This is not to write in defence of the greedy developers who made a fortune selling the freeholds of new-build houses with rapidly multiplying ground rents attached.Nor is it to deny that millions of leaseholders are now trapped in potentially unsafe and worthless homes thanks to the presence of unknown or dangerous materials in their buildings, particularly those ignored in buildings under 18m.In both instances, the government was right to take action, and when it comes to fixing cladding, we need to see even more government action.But leasehold itself never was the problem, but rather the actions of others in the housing supply chain.Ground rentGround rent – the centre of the first big recent leasehold scandal – has existed for hundreds of years but only made the headlines recently because developers inserted clauses that would see payments double every 10 years and pushed buyers into using their preferred conveyancing solicitor. But it is worth noting it did take some 500 years for these loopholes to emerge.Historically many leaseholders paid what is known as ‘peppercorn’ rent, which sometimes could be as low as a £1. In these cases, freeholders often don’t bother collecting them at all as the admin and hassle costs more than what they would receive.Admittedly, ‘peppercorn’ rents are far less common today. But outside of the rip-off leases sold by some housebuilders, ground rent rarely exceeds a few hundred pounds. In 2018, insurer Direct Line put the average ground rent at £371 – not far off an annual gym membership.Critics argue why charge ground rent at all. Yet without them, there is no incentive for freeholders to take an active interest and invest in assuring professional management in the upkeep of a property.This especially is an issue for leaseholders living in blocks of flats where there are communal areas in need of maintenance and management. The industry certainly does not need any more absentee landlords.Common holdCommonhold, where flat owners collectively own the communal areas outside of their apartment through an association, is often held up as the alternative solution here.But the reality is many flat owners don’t want to be – or can’t be – property managers. Fundamentally, property management is a complex job that requires a wide range of knowledge and skills and an understanding of finance, legislation and regulations.Nor would commonhold solve an issue as complex as cladding.Right now, in many places we have a financial hot potato where different parties – developers, contractors, building owners, leaseholders, the government – try to pass on the cost of cladding remediation to each other as no one wants to pay or accept responsibility.The issue here again is not with leasehold but with the government for failing to create an adequate post-Grenfell regulatory and policy landscape, with sufficient funding to pay for necessary cladding works.Caught between the cladding crisis and the ground rent scandal, leasehold as a tenure has been tarnished. The real villain however is government inaction, having been too slow to take on dodgy developers and not fast enough in making sure homes are safe.Read more about he proposed changes.Mary-Anne Bowring is group managing director at Ringleymary ann bowring Ringley Leasehold Reform November 25, 2020Nigel LewisOne commentSimon Davies, A A 25th November 2020 at 4:47 pmRemote fee extractors via ground rent, permission fees, commissions and freeholder appointed managing agents have no place embedded in peoples’ homes in 21st century England and Wales.Most home buyers want to control their own destiny, and not have a cost regime imposed upon them by a remote entity. Those who don’t or can’t should consider a shorthold type tenancy, otherwise their heirs may have difficulty selling their lease “asset” later, especially if it has on going fees attached after they have gone.Log in to ReplyWhat’s your opinion? 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