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Richard Spector: “Leasehold laws to end immoral housing practices”

This week, Managing Partner and real estate expert Richard Spector contemplates the upcoming ban on leasehold properties, a crackdown on ground rents, and additional support for homeowners.

Shortly before the country broke for the festive break, Communities Secretary Sajid Javid announced that the Government would take substantial action against the growing controversy that is leasehold properties.

The action plan included a complete ban on leaseholds for almost all new build houses – with exceptions where necessary, for example, in shared ownership.

Leasehold was a hugely contentious issue in 2017. Reports of leaseholders being “ripped off” were flooding the mainstream news, as freeholders were selling off the rights to the property to investment bankers, or hiking ground rents to unjustifiable levels.

House builders, such as Bellway, were able to sell leasehold properties to buyers with the potential to buy the freehold at a reasonable cost, but would sell them on to investors just a couple of years later.

This practice is considered legal, says Richard Spector. In England and Wales, a “right of first refusal” applies to leaseholders of flats. But this does not extend to houses and freeholders are not legally obliged to tell the current leaseholders.

Following that, a Bill was introduced to Parliament aimed at ending the practice and compensating those who had fallen victim to the scheme.

Introducing the Bill in November, Justin Madders, MP for Ellesmere Port and Neston, said the leasehold laws protecting homeowners must be overhauled to stifle “rip-off” freeholders and builders, who he said were treating leaseholders like a “cash cow”.

“We need a similar process to PPI for those who have fallen victim to this scam. We need to give people the chance to fairly escape that trap,” he added.

Campaigners estimated that as many as 100,000 households would be reimbursed if the compensation scheme was to go ahead.

Indeed, among the many measures included in Mr Javid’s proposals include setting ground rent on all new long leases – for both houses and flats – to zero.

The Government will also consult with the Law Commission on how it should support existing leaseholders in purchasing the freehold of their property, or in extending the lease they currently have.

Figures included in the report estimate that there are as many as 1.4 million leasehold houses, not including flats, across England.

In a statement, Mr Javid said: “It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms.

“It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices. That’s why the measures this government is now putting in place will help create a system that actually works for consumers.”

About Richard Spector: Managing Partner Richard specialises in property transactions and commercial litigation. Richard has acted in a number of high-profile cases and was heavily involved in the litigation that arose from the collapse of Lehman Brothers. Richard has been involved in a number of cross-border litigation cases and recently acted successfully for the Claimants in Harlequin Property (SVG) Ltd & Anr v Wilkins Kennedy, listed in the Lawyer’s top 20 cases of 2016.

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Richard Spector

Richard is a Partner in the litigation department. Richard specialises in commercial litigation across a number of sectors and often involving international elements to the dispute. Richard has acted in a number of high profile cases and was heavily involved in the litigation that arose from the collapse of Lehman Brothers.

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