The 28th Of October 2017 marks exactly 50 years since the Leasehold Reform Act 1967 became law. This Act gave owners of leasehold houses the right to force their freeholder to sell them the freehold of their homes.
It is a damning indictment of our ludicrous leasehold system that houses exist at all as leasehold as all houses should automatically be freehold.
The only single reason they are sold as leasehold is to create an asset class for the freeholders who own them.
Before 1967 there were no legal rights to buy the freehold of a house which meant when the lease term expired the land and the house on it, which usually had not been paid for or built by the freeholder, would become the sole property of them and they would evict the leaseholders and sell their windfall property for a handsome profit. This had already cause huge public outcry for decades.
The Labour Government under Harold Wilson committed to bring in this new legislation to allow leaseholders the legal right to buy their freeholds. The bill was meet with vicious opposition by the Conservative party at the time.
The Tory MP Anthony Barber who would go on to become Chancellor of the Exchequer was one of the main critics of the bill. He called the new legislation “legalised theft” and spoke of it as a “moral outrage…let us bash the landlords and glean some cheap popularity with the leaseholders. What the leaseholder has bought is not the house itself, but the right to live in it for the period of the lease”
He then argued the financial case for the freeholders using the same arguments which are still used today to justify the needless freehold ownership of leasehold houses “Many of the ground landlords concerned are charities, pension funds and small persons. Where is the justice in robbing them in this way? This is barefaced robbery!’
After the usual political tennis between the House of Commons and the House of Lords a much amended bill did actually become law.
It quickly became evident that this piece of legislation was unfair, unworkable and muddled due to the political intervention of those representing the powerful interest of the freeholders.
During the last 50 years the legislation has been in place the unsuitability of it has become even pronounced. In fact, even a cursory examination of its flaws is a startling example of everything that is wrong with our indecipherable leasehold system.
For example, even after 50 years of legislation, a myriad of court cases and millions of pounds of legal fees being spent, there is still no legal definition of what a house is.
It beggars belief that the main legislative vehicle governing freehold purchases in this country can’t even agree on a legal definition of a house, particularly when new-build houses are being sold on a leasehold basis right now.
It seems impossible to all but affluent enfranchisement lawyers that this could still be argued over, even the children’s television programme ‘Play School’ had managed to clearly work out this definition.
The valuation methods used by the Leasehold Reform Act 1967 to establish the payment a leaseholder must make to a freeholder are also nonsense and so complex only specialist valuers can understand how they work.
There are three different ways to calculate the cost of buying the freehold of a property depending on the terms of the lease, and each one is more complex than the last. What they all have in common is that they give leaseholders a costly legal headache and unfairly they must pay huge disproportionate fees to the freeholder, in addition to considerable legal fees.
There are also no legal prescribed timelines in the 1967 Act that specify how long a freehold acquisition should take; the freeholder decides how long this process will be and, of course, they can bend the rules to suit themselves.
In addition, there is no simple way to remove unnecessary fees or restrictions when the leaseholder buys the freehold. Clauses that require the leaseholder to pay hundreds of pounds to their freeholder for permission to change the carpets or sub-let their home, for example, have been put there simply to make money for the freeholder and are totally unacceptable.
Leaseholders currently have to apply to the Upper Tribunal to make a case or the removal of such restrictions – for which they incur further legal costs.
The Leasehold Reform Act 1967, although well intentioned, was not fit for purpose 50 years ago and it is clearly is not fit to be used in the 21st century. Its intention was to act as a ‘sunset clause’ for leasehold house ownership and they probably imagined back then that 50 years into the future there would be no more leasehold houses in existence.
Nothing could be further from the truth as a new generation of unscrupulous developers have needlessly trapped many thousands of people in this revenue generating leasehold house scam and they use this flawed piece of legislation to extract eye watering amounts of money from unsuspecting home owners.
This dysfunctional piece of legislation needs to be changed by the Government immediately to end this legal nightmare once and for all to help those trapped in the spider’s web of leasehold and the future sale of leasehold houses should be made illegal from this point on.