‘My ground rent increased by 9,000 per cent after I bought a flat’ | EUROtoday

Dave Pickett purchased his first residence in 2019, and remembers feeling “overwhelmed” by the complexity of his leasehold settlement.

When buying the leasehold for his maisonette in Hitchen, Hertfordshire, he mentioned he knew there was a floor hire – an annual payment paid by a leaseholder to the freeholder – of £25 per 12 months.

But a couple of months later, the 33-year-old communications skilled obtained a letter saying the payment ought to have been reviewed in 2018, and he might count on it to go up by between £2,000 to £3,000 per 12 months.

Following a prolonged arbitration, in 2023 it was dominated he and others in his block must pay a £2,350 per 12 months – a 9,000 per cent improve in floor hire from when he bought his residence. Not solely that, however the arbitrator selected to backdate the rise to 2018, leaving Mr Pickett with a £17,000 invoice to pay.

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On Tuesday the federal government introduced it could cap floor rents paid by leaseholders at £250 per 12 months in England and Wales as a part of main adjustments to residence possession.

Mr Pickett mentioned for these in his block, the cap is “the best news ever”.

“Not only does it help with the financial cost every year, but it also opens the pathway for us to buy the freehold and take back control of our units,” he mentioned. “I’m very positive about it.”

Around 4.83 million houses in England are leasehold, that means the homeowners personal the suitable to occupy the property from the freeholder for a sure variety of years. Ground rents are often paid annually and are sometimes topic to will increase by RPI inflation at fastened intervals.

“As a first time buyer, the complexity around leasehold and marriage value is so overwhelmingly complex,” he mentioned. “There was no support.”

Mr Pickett mentioned the bottom hire in his block made the flats “unsellable”, including a report he commissioned discovered the worth of his property would have decreased by round £30,000 on the open market if he had determined to promote.

The 33-year-old ultimately opted to pay for a lease extension, however mentioned the adjustments launched as a part of the draft Leasehold and Commonhold Reform Bill are “a step in the direction of bringing some parity back between freehold and leasehold”.

‘It’s arduous to abdomen’

Not everybody feels so optimistic in regards to the reforms.

Pensioner David Ridell, 66, lives in Hendon in North London. He pays round £226 per 12 months in floor hire, that means he won’t profit from the cap.

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He mentioned whereas some will undoubtedly profit from the change, he discovered the announcement “hard to stomach” after Labour’s manifesto promise to abolish leasehold fully.

Mr Ridell identified that in response to estimates by the English Housing Survey in 2023/24, leasehold owner-occupiers reported paying a median annual floor hire of £304 a 12 months – that means the common good thing about the coverage is prone to be round £54 per 12 months.

“My local MP posted saying it will ‘change people’s lives’” he mentioned. “But even people who will benefit will only benefit by an average of £54.

“That’s better than nothing, but it won’t change lives.”

He criticised the plan to scale back floor rents to a ‘peppercorn rate’ in 40 years time.

“I’ll be 107 by then, so I look forward to that,” he mentioned. “The spin on it makes me so angry”.

Mr Ridell mentioned he’s paying round a £250 service cost per 30 days, which he “would really like to see something done about”.

“What they promised at the election and what they announced today is chalk and cheese,” he added.

Making the main announcement in a video posted on TikTok, prime minister Sir Keir Starmer mentioned: “I’ve spoken to so many people who say this will make a difference to them worth hundreds of pounds.

“That’s really important because the cost of living is the single most important thing across the country.”

Critics from the Residential Freehold Association (RFA), which is the commerce physique representing skilled freeholders, mentioned the bottom hire cap was “wholly unjustified” and warned over the affect on the UK’s status for traders.

It mentioned the bottom hire cap would harm investor’s confidence within the UK housing market because of freeholders dropping “long-established” contractual rights.

“The resulting forced exit of professional freeholders from the sector, will hinder building safety projects and disrupt the day-to-day lives of residents,” it added.

But the National Leasehold Campaign (NLC) mentioned it was “disappointed” the federal government didn’t implement peppercorn floor rents instantly, however acknowledged the “relief” the £250 cap will deliver.

“We have campaigned for peppercorn ground rents and an end to this abusive system for years” mentioned Katie Kendrick, kids’s nurse and co-founder of the NLC. “Whilst today’s announcement on ground rents falls short of immediate peppercorn ground rents, this bill as a whole is another step forward in dismantling the leasehold system in England and Wales.”