The main concerns when buying a house in most countries around the world are raising enough money and getting the ideal home, but in England and Wales there is an additional one: is it a freehold or leasehold property?
The owner of a freehold home is its absolute owner, including the land where it is built, as happens in other nations.
But whoever buys a home in England and Wales under the leasehold system, acquires the leased property for a set period of time, typically several decades, and you do not become the owner of the land on which it is located. remodeling and pay you an annual rent for the land, which is known as ground rent.
In many cases, this rent is symbolic: a peppercorn, a metaphor used in English law to refer to a payment in cash very small.
But in others it becomes so expensive that owners end up selling their home because they can no longer afford it.
It is estimated that 20% of properties in England are under the system of leasehold, most of them apartments.
A long list of problems
Basically if you own a freehold you own what is below the ground and everything above the ground air, while the leasehold was created so that two or more people can own different properties one on top of the other, lawyer Saul Gerrand, an expert in real estate valuation and extensions of leasehold contracts, tells BBC Mundo.
Karolina Zoltaniecka, co-founder of Commonhold Now, an organization that fights to end the leasehold system, says there are so many flaws in it.
It has created systemic power mismatches that don’t benefit buyers. It is something that has no place in a modern society, says Zoltaniecka.
Excessive feudal rents, very high maintenance fees, poor management of buildings that often put the safety of the owners at risk, properties that depreciate dramatically because their leasehold is running out. The list of problems associated with the system is very long, she adds.
It is a system that has its origins in the Middle Ages.
It is a feudal and medieval system. Originally, there was a count who owned the land and rented it to someone, generally a farmer or farmer, who lived there and paid rent with part of what he produced on said land or through some service, explains Gerrand.
The regime remained like this for centuries, until a discussion began in the 19th century about the injustices it created..
From the 1920s various laws were introduced to limit the rents that landowners could collect and restrict their right to evict tenants.
Many of these landlords began selling long-term leases (typically between 99 and 125 years) on their houses and apartments without losing ownership of their land. This was the beginning of the modern leasehold system that exists today.
Leaseholds were originally sold on the basis that eventually, when the lease expired, ownership of the land and house would revert to the original owner.
However, starting in the 1960s there were changes in the law after long-term elderly tenants, who had little knowledge of the legal process, were threatened with eviction when their leases expired.
Currently the legislation allows, among other things, that the owners of houses (since 1967) and apartments (since 1993) under the leasehold system can extend their leases for an additional 90 years.
Despite this, many leasehold apartment owners complain that they are overcharged for repairs and maintenance of common areas of the buildings in which they live and are faced with disproportionate rent increases from the land on which their houses stand.
Joe Douglas still vividly remembers the feeling of happiness he felt in 2015 when he bought his apartment in a new building in north London.
Also he remembers how that happiness quickly turned into anxiety and ended in a nightmare.
After selling all the apartments, the developer sold the land and building to an investment fund, causing Joe’s house to instantly depreciate.
Now he has to pay more $5,000 a year to maintain an apartment that he is supposed to own.
I feel cheated. I moved into my wife’s two years ago, so I don’t even live there anymore, the young man told BBC Mundo.
Joe pays about US$2,900 annually for community fees to maintain the building and must also pay for insurance to cover any possible damage to the building that costs him almost $2,300 a year.
That’s a lot of money. In the case of insurance, the owners of the land send me the invoice without any kind of transparency. They don’t tell me if it’s a competitive rate or how much money they make in commission. They don’t tell me anything, Joe explains.
There are other buildings in the same area that pay less than half what we pay for the same type of insurance.
What nobody tells you When you buy a property under a leasehold contract, you become a prisoner of a system, you don’t have any kind of right, and you don’t know if you might be enriching someone who is taking advantage of your situation, adds the young man.
* 100061*Currently, when a property is first sold on a leasehold, it is granted a rental agreement for a fixed period of time, usually between 99 and 125 years, but can sometimes be as long as 999 years.
* 100063*Leasehold holders can extend the lease or buy their home outright, but it is a process that can be complicated and very expensive.
If the lease is not extended, the property owner loses their home , which reverts to the land owner.
In recent years, large homebuilders in England have sold properties on leasehold contracts where the ground rent doubles every 10 to 25 years.
In June 2022, the UK government introduced legislation that anyone buying a home on a new leasehold with a minimum of 21 years remaining is exempt from paying that annual rent of the land.
However, this does not apply to homes that were purchased before that date: millions across the country that have become a burden on their buyers and that, like Joe’s, they can be extremely difficult to sell.
For years, organizations like Commonhold Now have encouraged authorities to do away with the leasehold system.
British Home Secretary Michael Gove has criticized on several occasions, describing it as unfair and outdated.
In January this year he said he would follow through on a promise to abolish it, but in early May it was revealed that the government’s plans to reform the system, which will be published later this year, they will not specify a date for ending the leaseholds. Now they say they are going to reduce the number of leaseholds to a minimum. The Minister of Housing has always shown his rejection of the system, so in Commonhold Now we believe that it is an order that comes from the central government, which feels that the system does not need to be abolished completely.
The expert Saul Gerrand He says plans to abolish leasehold are altruistic, but he’s not sure they’re realistic.
The alternative is to create a ‘commonmhold’ system, where everyone in a building owns the land. This sounds great, but in reality under a regime like this, maintaining the building and making decisions around it becomes very complicated because the more owners there are, the more difficult it is to make decisions, he adds.
Sometimes you just need someone to stand up and say ‘I own it and this is my decision’.
Meanwhile, Joe says that if the government doesn’t act he will continue to feel like one more prisoner of the system.
*100091 *I feel like my prison has become a money making machine for other people and the worst thing is that the only thing I did to end up in this situation was buy an apartment.
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