Money Box Live: What's going on with leasehold?

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BBC Sounds. Music, radio, podcasts. Hello. In this podcast, we're asking how much does leasehold cost you? And what will planned reforms actually change? Around 10 million people in the UK live in a leasehold property. They might pay a mortgage or even own their home outright, but they also have a landlord, the freeholder. And as well as their mortgages, they may also be liable for ground rent, service charges, insurance fees and maintenance costs.

Behind the scenes, work is continuing on the leasehold and freehold reform bill. In fact, just this week, it's being examined by members of the House of Lords. But there are growing concerns among leaseholders and campaigners that promised changes may be watered down. Before we hear from today's experts, let's hear from some leaseholders. I went for a walk in Dakota Park in Chapelford, Cheshire.

It's a wide green space. It's surrounded by new-built houses and flats. Many of those are leasehold homes. And as people walked by with their children, grandchildren and dogs, I asked how they feel. about someone else owning the freehold behind their homes. I understand why it is the way it is. However, it somewhat annoys me that I have to pay each month for a house that I already own.

And I bought that house at auction outright, so I should own it lock, stock and barrel. And yet I still have to pay somebody the right just to have my house stood on some land that otherwise would be doing absolutely nothing with no commercial value. Do you think about it much? Does it kind of factor into your plans? No, because the payment's not huge. It's £50 a month, a year even. So it's not an exorbitant amount. However...

There's also that thought in the process of what happens if it increases, what happens when interest rates go up, how much am I going to have to pay for this in the future? Tell me, you have lived in a leasehold property? Lived in a leasehold on our first property, but it was for 999 years. But from then on, even though we only had a small ground rent, we decided that we preferred freehold. And why was that?

Just simply the principle of it, the fact that obviously the leasehold owner does have a control even though it's a minimal payment. They do have actually control of your property and we didn't like that.

it doesn't bother me at all it's a 999 year lease it doesn't change it's a fixed rate so i don't mind because it's 999 years i think if it's a flat with a short lease then i'd probably be concerned well i wouldn't at £3.50 a year but if the ground rate was increasing or started off on a high amount, I'd be concerned.

Well, listening to that are today's experts in all things leasehold. I'm joined by Matt Lewis, a consultant solicitor at Commonwealth and Leasehold Experts Limited. And Matt, you're also director of Leasehold Management Professionals, which is an advice organisation. for managing agents. You know this area inside out. Thank you. Good afternoon.

Thank you. Also joining you is Martin Boyd, chair of the government-funded Leasehold Advisory Service and also chair of the Leasehold Knowledge Partnership, which supports and campaigns on behalf of leaseholders. Martin, good afternoon.

Good afternoon. Martin, let's start with a really simple question we've had in an email from Deepinder. What is a leasehold? A leasehold is a right to occupy a property for a fixed period of time. And as some of the people you spoke to, some of that ownership may be for 990 years or it may be for a much shorter period of time.

Some of the people that I spoke to in the park mat, they're only paying quite small ground rents. It doesn't have a significant impact on their finances. And in fact, the... Residential Freehold Association which represents the freeholders, it pointed to a government report that it says shows the vast majority of leaseholders are content with the leasehold system. Are most people worrying unnecessarily?

Well, I think that it's important to have in mind that there are examples out there of good management, of long leases. with nominal rents, if any rents at all, peppercorn rents, and with no problems. along with control by residents of the management function. And so for those that are not experiencing difficulty, I don't want to be the person that gives them worry unnecessarily.

And when we say peppercorn, we should explain that just means really, really small. Martin, I mentioned legislation in Parliament. Just catch us up on where we are, because the government has promised major reforms to fix some of the problems in England and Wales.

leasehold where's that up to and what's it going to change? Right well at the moment the legislation has finished its passage in the House of Commons and has now moved up to the the House of Lords. The intention of the bill is to change a number of things, to rebalance the system, to give leaseholders better rights to financial information.

to make it easier for them to go to the property tribunal to change the rules on enfranchisement, i.e. extending their lease or collectively buying the freehold. between the leaseholders who own a block of flats. Now one possible alternative to this is Now, Scotland's cities have lots of flats. It doesn't have the leasehold system. It has common hold, which is where the occupants in the building share responsibility for common services. Martin, it's not a perfect alternative.

alternative is it anyone who's fallen out with the neighbours would probably dread the idea of trying to fix the roof together yeah unfortunately i mean scotland is the worst example of common hold that we have around the world. They didn't quite get the legislation right when they abolished leasehold, so they've ended up with a system that doesn't...

necessarily allow for the proper maintenance of the outside of the building. If you look at other jurisdictions, such as Australia or America or Canada, where they've implemented a full common hold stroke strata system. Buildings work far more effectively than they do in this country.

OK, and we don't have a response from Scotland, but what you're suggesting is there are perhaps other places that we can look for a solution for that. Back to my walk in the park. I also met a couple who are concerned that they're...

freehold had been sold on. We bought our home from the builders and they sold the leasehold to an organisation who are now our landlords. So it kind of makes it difficult sometimes when we're trying to do things and it's things like... the simple home improvements you want to do on your home you've got to ask for permission before you can do them and to ask for permission they want to charge you 300 quid just to ask without even doing anything or getting that permission

Does that feel a bit surreal when you bought this home? This is your home. Very much so, very much so. We had an issue with them where we were contesting a charge and everything and their whole response was to get in touch with the mortgage company who then said you're going to have to just pay them otherwise they're going to take the property off you because they own the land.

Matt, this is a really important point, isn't it? Unlike with common hold, if you break the conditions of your leasehold, then it's possible within the law for you to lose your home. Exactly, yeah. I think it's important to note a few things here. I think the first thing is that typically these sorts of restrictions do serve a really valid purpose. There are examples where that's not the case, but typically they do serve a valid purpose.

And it's really important to make the point that leaseholders need to read their leases carefully and follow those restrictions as there are those risks that you allude to, along with possession. in the eventuality that that goes all the way through the statutory hurdles. In terms of the costs, linked to restrictions, it's also important to read the lease and make sure that those things are technically payable.

But there is also protection in law at the moment in that administration charges, which these typically are, are regulated. There are requirements for them to be demanded correctly. to be reasonable in amounts, so on and so forth. Okay. Martin, a lot of people might be surprised to hear you need to ask the freeholder and potentially pay to ask the freeholder to make changes to your property. Is that issue...

or the issue of potentially losing your home, is that likely to be addressed in the Leasehold and Freehold Reform Bill? Yeah, there are several things that are... being looked at in the Bill, one of which is going to be a requirement that landlords publish these charges so that we have greater transparency than we currently have. OK, thank you. Matt, do people have a right to buy their freehold if they're living in a leasehold home, particularly a house where it's more straightforward?

Yeah, so there are subject to eligibility assessments. There are rights in law for a leaseholder of a house to acquire the freehold of that house. or to elect a new lease at a market rent, but typically the new lease option isn't elected. And typically leasehold house owners tend to look to acquire their freehold. Okay.

Thank you. We're getting, as you might expect, a lot of emails. One topic we're hearing a lot about is ground rent. So let's hear from Tom. Each 20 years, my ground rent doubles. So it sounded quite good 20 years ago now.

But if I wind forward 20 years or 40 years, it's not fair. It's a lot of money that I'm paying away for nothing in return. You're paying full price as if it's a... a house on its own piece of land but ultimately you never own that asset but you are 100% responsible for all the costs associated with that.

Matt, there's a lot going on in what Tom had to say, but doubling ground rents, that is a key issue for leaseholders, isn't it? And the Department for Housing told us it's not fair that many leaseholders face unregulated ground rents for no guaranteed service in... return. At the moment, does it risk making homes unmortgageable? So I think there are two considerations here. I think the first is the level of the rent.

And the level of the rent typically causes a number of difficulties, either if it's too high with reference to the value of the property. Sometimes mortgage lenders can be unattracted by that or conveyances looking at properties. or if the review mechanism is unattractive in its nature and that it's too fast. Just that it's going up too fast. Indeed, or if it's a doubler. or if it's linked to an index which is unattractive in nature and all of these sorts of things factor into

a mortgage lender's consideration of whether or not to lend on these properties. And it can make it very difficult. Martin, the government had planned to reduce ground rents to zero or to a tiny fee, as we were saying, a so-called peppercorn rent. Times reported at the weekend that they might instead be capping that at £250 a year instead we've not yet been able to confirm that what's going on?

Government is currently reviewing which option they're going to move forward with, and I think that there is speculation that there's an announcement that's imminent, but we don't know what the outcome of that. decision is. So we might get news in the near future. Thank you.

Tom mentioned there the costs that were involved in his leasehold home. That can mean with the service charges and repair works that he can be billed for. Melissa's been in touch on exactly that issue and her freeholder is her local council. We spoke before the programme.

So this was a new fire doors that we were told we would need on our bin chamber. We had just had a new door placed on our bin chamber that cost us £1,500. That lasted three months. The council then took that off and put new supposedly fireproof doors on.

That cost us part of an £8,000 bill for remedial works for fire safety repairs. One of those doors blew off in a storm in January, and so the bin chamber is now open. So if there was a fire in there, whatever purpose, safety purpose those doors were. supposed to have is now completely ineffective and yet we still have had to pay for that work.

Martin it's important isn't it to acknowledge there will be costs associated with shared public areas with maintaining a building that money has to come from somewhere. At the moment, do leaseholders have any rights to oversee or to challenge the cost of works? It can be a mixed set of rights, particularly...

with social sector buildings. The leaseholders can go to the tribunal to challenge the reasonableness of the costs. The difficulty is at the moment... the leaseholders have got no right to their legal costs in raising that challenge and the landlord can very often have the right to pass on their legal costs to the leaseholders. And is this something that is going to be addressed in the bill once it passes through? Yeah, that's another one of the issues and perhaps one of the most important.

unsexy sounding elements of the bill is this right to accounting information? Accounting information is never unsexy on Moneybox Live. Well, the problem is currently you have no easy means to compare your service charge costs with another block in your area or anywhere else in the country. One of the proposals in the legislation... is to move towards a standardized set of accounting information

So you will be able to compare how much it costs to repair your lifts compared to the block next door. That's really useful. In fact, Judith has emailed on that. She's emailed to say, how come leasehold businesses are the only businesses I'm aware of that do not put up a clear price list of sales? services, but you're suggesting that it might be easier to compare what other people are getting after this.

We're getting a lot of emails about service charges. Let me read you just one from Liam. He says, I bought the property in 2017. The service charge was approximately 120 quid a month. The charges were then raised by about 80 to 90 pounds a month, plus a one. off charge of over £8,000 due to roof replacement. He says my current charges are approximately £550 a month for service charge, ground rent and a reserve fund charge.

That seems like a huge amount compared to what he paid when he first moved in, comparable to a mortgage. Indeed, yeah. And I think it's one of the common unknown features of residential leasehold property in that... in that typically leases allow for variable service charge costs in an unlimited amount, in that the amount that's needed... is required to be paid and that can be all of a sudden and unknown at the point of purchase.

Thank you. Right. A lot of leaseholds, as we've been hearing, are for hundreds of years. There's no real question of time running out. Some are for much shorter periods. Let's hear from Claire now. I spoke to her earlier. I bought my flat. in 2007 at which point the lease was 81 years remaining and um

I had absolutely no idea that it was about to drop under the marriage value threshold. I'd never heard of marriage value until about five years ago when I started thinking about possibly selling, at which point I've discovered that... The premium that I would have to pay the freeholder is around about £70,000, which essentially is for nothing because there's no sheds, areas, there's no maintenance, I don't pay ground rent, I don't pay service charges.

So that's what I've really been waiting for the leasehold reforms to clarify whether or not that particular part of the legislation is going to be reformed. So presumably you weren't able to sell your home. It's not sellable currently. It would only be sellable as an auction property or to a cash buyer because a mortgage lender currently wouldn't lend with a lease of 65 years and actually wouldn't lend.

today on a lease of 81 years, which is what I had at the time that I bought it. So there's obviously been a change in mortgage lender's position over the years in terms of what they accept in relation to leasehold properties.

Has that meant that you couldn't remortgage your property yourself? I haven't had a problem remortgaging. Obviously, I've remortgaged several times over the years and it's never been questioned, but it's always kind of hanging over me that the next time... the mortgage comes up for renewal, I might find difficulties, but today I'd never have.

OK, Matt, I have a pretty big challenge for you. Can you explain what is meant by marriage value? Because it's not quite as romantic as it sounds. Thank you. Yeah, so marriage value is one of the ingredients. within the price that a leaseholder pays when they extend lease lengths or when they participate in a collective freehold purchase. And it's important to have that in mind by way of context in that it's one of the ingredients and it's only payable in accordance with the current...

regime. So in layperson's terms then, essentially it's how much you'd need to hand over to the freeholder based on how much the property's value is increased by no longer being leasehold? Yes. I'd rather not get into the nitty gritty of precisely what marriage value means, but rather to say that in context, it's one of the ingredients that's payable as part of the overall price that's payable when a lease...

extends lease lengths or in franchises. What kind of costs, and I realise that they'll vary, but what kind of costs do people typically pay to extend a lease or buy a freehold, briefly? So it's also important to mention that... As part of the overall package of costs, they've got to pay their own professional costs with their lawyer and their surveyor valuer. In addition, they'll have to pay a contribution towards the landlord's costs.

which are the landlord surveyor and the landlord's valuer, along with the price payable. And in more complex lease structures, this can involve multiple parties and having to pay additional layers of costs on each of those parties' involvement. OK, thank you. Martin, briefly, a key part of that bill passing through Parliament we've talked about so much is to make it cheaper and easier for leaseholders in houses and flats to extend their lease, to buy the freehold.

Is there light at the end of the tunnel for Clare? Yes, because the bill proposals that both parties pay their own legal costs. And the intention is that after the bill is introduced, we move to an online calculator which simply gives you the number that you'll be required to pay. And there's no legal disputes. It's just a number. You have a choice of whether you pay that money.

or you don't extend your lease. That does sound like it will simplify things. Thank you. Look, our inbox is absolutely rammed with emails from leaseholders. Let's take a moment and hear from the side of the freeholders.

Executive Officer at John Lyons Charity, which provides funding to children's charities in London, and it generates funds through its freehold property portfolio. The charity exists not to make profits, only to give grants to children and young people's charities, predominantly within London. So we grant around £15 million each year.

The reason this legislation will impact us is because we receive income from our property on the St John's Wood Estate. A number of those properties are leasehold properties where we own the title. and we receive income of around £4 million each year. That income goes directly towards grants and represents around a quarter of all of our income each year.

Our grant giving has never been in more demand with the cost of living. We've seen a 70% increase in our grant applications just over the last year alone. And we're now starting to look at scaling back our grant giving if this legislation goes through, because it will have such an impact upon what we will be able to do going forward. How are you making money out of your freehold? Is it through ground rents? No. So we only charge one pound peppercorn rent. So it's really through when...

the people that own the houses but don't own the freehold titles. So where we own the freehold titles and they want to extend their leases, then they pay us a sum of money. Now, what I would like to point out is our properties are very expensive. The people that own those properties are very wealthy and they are often overseas investors. So this would be a transfer of wealth from a charity to already very wealthy people.

I want to read you an email we've had from Andrew. He's a leaseholder in Coventry, obviously nothing to do with your freehold. His freehold also belongs to a charitable trust. And he wrote to us... I imagine the freeholder stands to lose a big income stream if ground rents are reduced to a peppercorn or capped. They'll need to raise funds by other means. And he says perhaps by employing a fundraiser or shaking cans on street corners. Frankly, I do not care. Charity begins at home.

how can a charity exploit one group of people leaseholders in order to help the poor and disadvantaged do you think Andrew has a point Up to a point, but I think the public benefit of a charity outweighs the right of an individual in any particular case. And I think the public good that charities undertake should be weighed up within this legislation. Do you think that the legislation... shouldn't go ahead? Do you think that leasehold doesn't need reform?

No, not at all. I think there should be reform. And John Lyons Charity has supported virtually every proposal within this legislation. So we are very happy to support the abolition of ground rent. it is wrong where ground rents you know double and treble over a short period of time that's that's not something that we have ever done or would ever do anyway so we are completely supportive and understand the need to make

leasehold, simpler and cheaper. Dr. Lynne Guyton there from John Lyons Charity. Martin, this is... An important point, isn't it? Not every case of leasehold and freehold is straightforward. Should big property investors suddenly benefit from a windfall at a charity's expense? Yeah, it's a difficult one. As the chair of a registered charity, I have some sympathy with the speaker. But what the government has said very clearly is...

When someone extends a lease the next time, they will compensate the landlord. But it will be the last time the lease needs to extend because it's going out to 990. Which will wipe out their ability to keep bringing in income to pay out to children's charities. Correct. but um you know income streams have changed over the the the years um you know if we go back to victorian era it was perfectly possible to spend said children up chimneys

We don't allow that sort of thing anymore. The government has clearly made a decision that lease extensions and the leasehold system and ground rents is coming to an end.

OK, let's rattle through a few last questions each. Matt, we've had an email from Rob. He says, both Tories and Labour say they plan to make it easier and cheaper to extend a lease. My dilemma is I only have 82 years left on my lease. The advice is... not to let this drop below 80 years. Do I try to extend now, costing up to £15,000, or wait for legislation to arrive, meaning I might only pay a few thousand? Time is against me. What should I do? Lots of people in a similar boat.

What should they consider when they're deciding whether to act now or wait? So I think that it's really important to take into consideration their own personal circumstances, whether or not they plan to sell in the immediate future is a key factor, whether or not they've got a mortgage lending product that requires them to extend. and lease lengths in the immediate future. And to have in mind, I think, of significance, any valuation advice that they've received on the topic of...

any potential gain that could be had. But also to have in mind the final point that we are in the final sort of stages of reform. Thank you. I'm going to leave it there. Martin, 10 seconds. There are lots of places people can turn for help and support. Yeah, the government... funded leasehold advisory service, of which I'm chair, Leasehold Knowledge Partnership, which is a charity, which I also chair, groups like the National Leasehold Campaign. They can all...

sort of help people lots of lots of help on social media thank you we could spend the rest of the day on this topic still not get through all the issues still not get through all the emails we will of course keep coming back to this as those reforms pass through parliament thank you to everybody who did get in touch

Thanks to everybody that we spoke to. And thanks to our panel. We've been hearing from Matt Lewis from Leasehold Experts Limited and Martin Boyd from the Leasehold Advisory Service and also the Leasehold Knowledge Partnership. If there's a topic you would like us to take a closer look at, then please do get in touch. You can email moneybox at bbc.co.uk. Include a phone number if you can.

In this podcast, the producer was Sarah Rogers, Production Coordinator Sandra Hardiel, Studio Manager Scott Henderson. Our editor is Beatrice Pickup. I'm Felicity Hanna, and this was a BBC News Money and Work production for BBC Sounds. I'm Kavita Puri, and in 3 million from BBC Radio 4, I hear extraordinary eyewitness accounts that tell the story for the first time of the Bengal famine which happened in British India.

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