Gove - Leasehold reforms

[audi321]

The latest announcement on leasehold reform is going to cap ground rents on leasehold properties.

Is it just me or is this a waste of time and not addressing the true issue of management fees?

I have a few leasehold properties and all of them have reasonable ground rents whereas the management fees are just increasing and increasing with seemingly no cap on what these companies can charge.

To me, it’s these which need a cap on the percentage of value (say 1% of the value of the property per year) not the ground rents.

[LooneyTunes]

Isn’t there already a mechanism for dealing with excessive management charges?

Unless things have changed, leaseholders had/have the ability to dismiss/change management companies.

[audi321]

They have indeed got the ability to remove management companies but in reality this almost never happens as finding all the owners is a tricky task

[rayny]

The amount of ground rent has major ramifications in relation to the Housing Act 1988 :

1 - A ground rent over a certain figure makes the lease an Assured Shorthold Tenancy.
2 - Because of the above, lenders are unlikely to offer a mortgage on the property.

[TallPaul]

audi321 said:

They have indeed got the ability to remove management companies but in reality this almost never happens as finding all the owners is a tricky task

I think you’ve answered your own question there. The reality is there’s loads of grief managing the freehold of blocks of flats, trying to coordinate with absent/awkward/disinterested/overinterested etc leaseholders is always going to be difficult and that incurs costs.
At the risk of sounding argumentative (which I promise I’m not, I own a couple of leasehold flats so I feel your pain), if you think the management fees are extortionate, instigate managing them yourself. Maybe even try and organise buying the freeholds with the other leaseholders to take full control. My dad did this for a block of 53 flats about 10 years ago and it was a major headache for him, in fact it still is. He still gets the odd leaseholder who didnt buy into the enfranchisement complaining at every opportunity. I know he wouldnt do it again.
I dont think I’ll ever buy another leasehold property again.

[rdjohn]

My understanding is that flats are not affected by this. It has been done to counter the recent trend on typical new developments on houses where the ground rents start off reasonable, but then double every 5-years, or so. Or even shorter periods.

Year 1 = £250
Year 6 = £500
Year 11 = £1000
Year 16 = £ 2000 etc etc

Quite why lawyers allowed clients to sign such daft agreements is beyond belief, but then if house supply is always well below demand, then people do silly things.

[brickwall]

I think in practice the escalating ground rents in new builds died a death a few years ago, when a lot of banks started refusing mortgages on them