The Conveyancing Association has urged for leasehold to be replaced in most cases by commonhold – where unit holders have a freehold interest in houses.
The association was responding to The Department for Communities and Local Government’s Tackling unfair practices in the leasehold market consultation, which closed yesterday.
The CA called for an end of “rampant profiteering” from lease administrators – those who manage leases on behalf of the freehold – who it accused of forcing leaseholders to pay extortionate amounts of money in fees to sell properties, as well as causing severe days.
Commonhold was introduced in 2002 but failed to take off owing to reluctance from homebuilders and mortgage lenders to get on board.
Beth Rudolf, director of delivery at The Conveyancing Association, said: “Much of our focus has been on whether commonhold could provide a real alternative to leasehold and following research, and a survey of the 175 commonholders in England, it was clear to us that it works well and the vast majority are happy with their arrangement. Plus, those that have also owned leasehold property said they would choose commonhold over it.
“Some refer to commonhold as a ‘failed tenure’ when in fact academics in a recent review could only come up with half a dozen technical flaws.
“The real reason commonhold is yet to take off is because of home builders and lenders.
“As was stated at the recent All Party Parliamentary Group for Leasehold Reform meeting, commonhold could only come in if there was a ban on creating value out of leasehold.
“Why would any builder, mindful of their profit line, choose to give up the asset value created by leasehold?
“Unless you are a business that specifically sets out to create affordable housing.”
If commonhold is not seen as the solution the association added that leasehold should apply when there are shared amenities and the term of the lease should be 999 years with a peppercorn ground rent.
It said administration fees should be based on a reasonable fee tariff and leaseholders must have access to a redress scheme if the lease administrator attempts to charge unreasonable fees or does not respond within five working days of a request.
The association went on to recommend discouraging developers by ensuring profits generated through ground rent or administrative charges are placed in a reserve fund, used to maintain the shared amenities which have necessitated the leasehold.
It also called for leaseholders to have a collective right of first refusal on the sale of the freehold, enabling the leasehold owners to come together to buy the freehold and take over maintenance, with the premium calculated on a statutory formula based on the ground rent, which would be minimal.
The association also wants all marketing literature to make it clear a property is leasehold, as well as the potential consequences.