Will a £250 ground rent cap help homeowners?

0:03In their election manifesto, Labour promised to tackle unregulated and unaffordable ground rent charges. So is a£250 cap on ground rent real progress for homeowners? Hi, I'm Tamara Kormornyk and welcome back to The Standard Podcast. If you're new here, hit follow and give us a rating. For all the latest news, head to standard.co.uk. Coming up, will a£250 ground rent cap help homeowners? We're capping ground rent at£250. pounds. And I've spoken to so many people who say this will make a difference to them of hundreds of pounds. So this is a promise that we said we'd deliver. And I'm really pleased we're delivering on that promise.

0:49That was the UK's Prime Minister, Keir Starmer, announcing the news of the ground rent cap on TikTok, of all places. So is the ground rent cap groundbreaking news for existing homeowners. In today's episode, I speak to the Standards Deputy Editor of Homes and Property, Megan Murdoch, to gauge the significance of the government's latest announcement. Plus, I speak to Harry Scoffin, who's the founder of Free Leaseholders, a grassroots activist group fighting for the abolition of the leasehold system. Hi, Megan. Thanks so much for joining me on the Standard podcast today. Thanks. Thanks for having me.

1:27So Megan, you are our resident property expert, The Standard. Could you give me a very brief, easy to understand explanation of what ground rent actually is? so grand rent is effectively the annual charge that an owner of a leasehold property pays a freeholder essentially it's for the privilege of using the land that the home sits on so you might own your flat or your house in London predominantly we're talking about flats when we refer to leasehold properties but you can be expected to pay this rent to the landowner in return for the use of that land. Now, it doesn't actually cover any service or maintenance costs, i.e.

2:14the landlord doesn't have to provide a service in exchange for this rent. And the amount that you pay can be fixed or it can increase over time. Okay. So, Megan, your nose is close to the ground when it comes to properties, especially in London. What kind of ground rents have you seen or heard about? So there used to be these doubling clauses that would mean that they could double every 10-15 years which means that the people on those leases are kind of faced with these massively escalating annual payments. What happened a couple of years ago is the Leasehold Reform Act banned it for most residential leases in England and Wales so it put an end to ground rents for leases that started on or after the 30th of June 2022.

3:06But if a lease was signed before that date, homeowners were and are still stuck paying these doubling and escalating ground rents. So the average ground rent paid by leasehold flat owners in London is now£412 a year. This is according to the English Housing Survey, while average ground rents across England increased over the last five years from£190 to£300. So it gives you an indication of just one of the hikes to living costs that people have faced in recent years. So Keir Starmer, in his announcement on TikTok, basically said that this is part of Labour's efforts to reduce the cost of living.

3:51Do you think a£250 cap on ground rents is actually going to make a difference to many people? Yeah, so what's been announced is this, under the draft common hold and leasehold reform bill, is this cap of£250 a year for grand rent, and then it will be reduced effectively to zero, or what's known as peppercorn rent, so it can be£1, but very often not actually paid. And this would happen after 40 years. so and this is all bearing in mind from late 2028 so yes it will make an impact to people's living costs in terms of a couple of extra hundred pounds maybe a year and for some people it's going to be a lot more than that so I think the government estimates that around 770 ,000 to 900 ,000 leaseholders currently pay more than this 250 pounds a year and then looking at London in the south, I think it's over half a million people.

4:54So it will certainly make a difference to a lot of people. And I think the data put out by the government this morning says that the cap will see leaseholders keep more of their money and see savings of£4 ,000 over the course of their lease. So you're talking about quite a lot of money, obviously welcomed by people, but it's not going to be life changing for a lot of people. Do you think that the ground rent cap and the trend of homeowners stomaching less costs will continue and even extend into leasehold agreements? So the reforms that are coming are service charges or service charge bills will be clearer and easier to understand.

5:39So this is part of what is already in law. So it was made law last year, but many of the changes coming still have to be implemented. So there's going to be greater transparency over service charges and there's going to be help for people to challenge unfair costs. there's going to be an imperative for landlords and managing agents to be more accountable and then they're also the government's also promised that there's going to be a reduction in mystery fees and unexplained hikes so in answer to your question yes but when that will happen no one's really quite sure because it could take months it could take years for these to to come into force.

6:21And why do you think the government went for a£250 cap and then this 40-year waiting period rather than just scrapping it all together like you would have if you were just buying a property after the most recent freehold reforms? So there are certainly lots of campaigners who argue that it should be abolished. Labour has been accused of betraying leaseholders after announcing this£250 cap because it pushed for payments to be reduced to a peppercorn while in opposition. So that was definitely the feeling that there would be an end to this feudal leasehold system and kind of abolishing ground rents would be part of that.

7:08um there has been extensive lobbying from pension funds so pension funds and insurance companies um they've always invested in property by buying the freehold and collecting ground rent so it's always been like a hands-off form of investment for these funds it's proper passive income yeah so it's it's low risk it's um i think it's kind of a general return of five percent um and they don't have to do anything so um the leaseholders the homeowners themselves are required to maintain the property and keep up repairs usually by the management company or a very considerable service charge so i think the lobbying from these pension funds and these freehold leader groups i think has been very effective um and i think the figures out today are saying that there's around 15 billion pounds invested by these groups so I think that's going to be one of the main reasons why it hasn't just been abolished but yes lots of lots of people are saying that it should have been.

8:16Wow lots of changes to come and hopefully great things for homeowners. Yeah. Thank you so much for speaking with me today. Thank you, thank you for having me. We'll take a quick break. Coming up, a conversation about ground rent and leaseholds with Harry Scoffin, the founder of Free Leaseholders, an activist group who want to get rid of the leasehold framework in England and Wales.

8:49Welcome back. Let's head straight to the interview with Harry. Hi, Harry. Thanks so much for joining me on The Standard Podcast today. Thanks so much for covering this story. So, Harry, I would like to go back to the beginning and ask, why did you found free leaseholders? What was the catalyst for you to do something about the antiquated leasehold system? So I found out in 2017 that my mum is a financial hostage of a very powerful, wealthy freeholder based offshore. And I knew I had to do something. and it's not using the current law, it's getting the law changed because, as you know, every country in the world, bar England and Wales, has a fairer system with flats called commonhold.

9:36They call it condominium, they call it strata title, all sorts of names. That means when you buy the flat, you own it outright and you don't live at the behest of one of these faceless freeholders that sees your home as a cash machine. Harry, what is your take on the government's latest announcement on the ground rent cap. The announcement today, it feels very rushed and it's more jammed tomorrow. What's really important is we already have legislation for leaseholder rights. The 2024 Leasehold and Freehold Reform Act, it was rushed through by the last Conservative government under Rishi Sunak.

10:12And it only happened because Labour in opposition said we want this done. But yet we've got that legislation, a government elected on a manifesto not to reform leasehold, but to end the feudal leasehold system, they're not switching on that legislation. So our concern is we're going on a wild goose chase about draft legislation, when actually, as my grandma would say, one in the hand is better than two in the bush. So why don't we actually switch on the law we've already got? What they've announced today is actually pretty thin gruel. But the backdrop is that they are running scared of big money interests, because big money interests, these freeholders, are claiming that their human rights will be infringed by these reforms.

10:58They claim that they're the victims when actually the victims are the millions of leaseholders up and down the country who don't have control of their homes, money and lives. People like my mum, who's paying£33 ,000 a year last year in service charges. There's not a swimming pool. There's not a gym. There's not a garden. There's lifts that regularly break, more leaks than a tea bag, windows that don't get washed. That is the life of a leaseholder and its servitude. And the rest of the world have gotten rid of it. But yet our politicians, they get elected and they tell us it's awfully complicated.

11:32We will be keeping the pressure on this Labour government for as long as the freeholders have their boots on leaseholders like my mum's throat. I have a feeling that you know a lot about the history of the leasehold system. Would you like to give us a brief, a very, very short version of this history? Yeah, basically, it comes from William the Conqueror in 1066. So basically, the French coming here, nicking the land, and then they introduced this system. So the Doomsday Book mentions freeholder. And that idea that someone is free of hold. But the problem is the freeholder also is the one that's the lord of the manor.

12:15So it comes out of serfdom and mineralism, a way of keeping the plebs down and actually making sure that the elites can basically live off the fat of the land and that they don't need to work for a living. And actually what's happened is because all the governments get captured by these interests, sometimes these interests might donate to the political party or they run, you know, charities, they run, you know, all party groups, you know, they do all sorts of things in the past and maybe even today to try to get their message through. They're always stronger than the little guy. And actually, this is a symbol of upper class corruption.

12:50I know I sound really leftist or Corbynista, but actually it's not a left right issue. You know, if you want a capitalist system, you've got to let people own land capital. And the problem with leasehold is it means people like my mum, but also my generation, 31. We're never going to be able to afford to buy a freehold house. The only thing, if we're lucky, will be to buy a flat. So we need to make sure that when we buy a flat, we own it outright. So Harry, for people that don't necessarily understand the nuances of property ownership in the UK, could you take me through the difference between leasehold, share of freehold and common hold?

13:30So basically common hold was kicked off in the late 80s by the Margaret Thatcher government and they looked at America, they looked at Australia where they've all got fairer systems of flat ownership where you don't have these outside money grabbing freeholders and they wanted to bring something like that to England and Wales and they coined it common hold and basically what it means is that you own your flat on a freehold so you own the flat outright and then you own a share in the common parts with your neighbours. You're not locked in to a freeholder or their managing agent screwing you for charges that you are not sure is actually affordable or even at the market rate.

14:10But where the difference is between that and share of freehold gets trickier. So you own your flat still on a lease, but then you own a share, you're a shareholder in a freehold owning company. So that's the difference. And share of freehold, they can be short leases still, you know, you've got that issue, but also the it's not an efficient way of doing it. So we've got a lot more flexibility in common hold. So we can really make the decisions that we need for our buildings. You know, that's the key thing. And leasehold, it's that opposing interest between the leaseholder and the outside freeholder.

14:46And the Law Commission looked at this six years ago. And they said that the two interests are diametrically opposed. So we want common hold. But even when you look at the detail of the government announcement today, the only way to get to common hold is to buy your freehold first. And that's what we're concerned about. There doesn't seem to be a clear and fair procedure and affordable way of buying the freehold first. They've been very silent on that. And do you get the sense that we're moving toward common hold as being the default? Or do you think, based on the government's announcement, that's sort of a halfway house, that we're actually a long way off?

15:29Yeah, and we're getting a lot of it in the neck for saying this, but we've got to be the truth tellers. We've got to be the sceptical campaign, because no one else seems to be. The fact is, we've had leaseholders have had so many false storms. no government in British history has brought forward a leasehold and commonhold reform bill as a draft draft legislation and turned it into an active parliament in the same term so that's a real worry when we see ground rent is only being switched on a cap at the end of 2028 we don't know what happens what if Keir gets ousted there's been lots of speculation about that we don't know what the next Labour leader whether it's his priority and also even if they pass this bill and it becomes an act, we're going to be where we were with the last Conservative government, where we're waiting on a new government to activate it with all the secondary legislation to switch it on.

16:19We worry that this is a cynical thing, so that they've nearly finished it before the election and then they go, Labour, vote us in, we'll finish the job and you'll get your common hold. It's too long to wait. Well, thank you so much for your time, Harry. Lovely. Thanks for having me and covering this story. and that's the standard for all the latest news head to standard.co.uk if you'd like to get in touch email us at podcasts at standard.co.uk we'll be back here tomorrow morning see you then