Mick Platt, the director of the Residential Freehold Association, wrote a spirited defence of England’s leasehold system whereby flats are owned with leasehold tenure and the freehold is owned by a separate individual or company.
The freeholder may, or may not, be a member of Platt’s association and is often a large property investment company or hedge fund, frequently based in a tax haven.
As described by Platt, these freeholders appear to be a wholly admirable bunch of men and women diligently ensuring a high standard of maintenance of the blocks they manage in the interests of leaseholders, avoiding disputes about repairs and generally looking after these buildings for everyone’s benefit.
The reality, however, may be somewhat different, as evidenced by the groundswell against the leasehold system that has erupted in the postbags of many members of parliament and prompted the current attempts by parliament to change the law.
For most freeholders, this is a money-making operation and the aim is to maximise ground rent income and other receipts such as insurance commissions and charges for alteration approvals and ownership changes.
As the unexpired lease term becomes shorter, large premiums can be charged for lease extensions and ground rents can be hiked. In short, this has become a racket.
It was inevitable that further reform of the leasehold system would eventually be forthcoming. The only surprise is that it has taken so long.
Peter Glover, author, Building Surveys