A Fleecehold is a jocular term used to describe the marketing of tenure on land. Unsuspecting, naïve, gullible, or aspirational homeowners might buy this tenure thinking that they have an asset, but who in fact have purchased a debt or obligation. The situation typically applies to:
The term arose in 2016; by 2018 it was used in a report of the Law Commission (England and Wales) which recommends new laws for adoption by Parliament, in the sense of "freehold properties that are acquired subject to onerous terms". [1]
The term fleecehold is used [2] to describe a number of tenure situations in the United Kingdom’s new-homes sector. The term arose in 2016 when campaigners [3] merged the words freehold, leasehold, and fleece, to suggest that sales of certain types of new homes involved fleecing, the "fleecing" being referenced meaning, “to defraud or charge exorbitantly; swindle". [4] Home-owners began to tell Members of Parliament that they had not been fully informed prior to purchase [5] and that they had been mis-sold their homes. [6] By 2017 "fleecehold" was being widely used by those affected and in industries related to the new housing sector. [7] By September 2018 the Law Commission, which recommends new laws to Parliament, had used the term in its document "Will our provisional proposals solve the ‘fleecehold’ problem?" [1]
The term fleecehold has been applied to the following forms of tenure: [8]
Buyers of such homes (and their supporters) say that although they passed through processes much the same as those associated with purchasing a home outright, they do not in fact own their homes outright. [9]
The term “fleecehold” is used when buyers of new leasehold houses find they are actually tenants living in properties subject to charges which “fleece” them for significant sums of money annually, incrementally, or on specific one-off occasions. [10] In March 2019 the Select Committee of The Ministry of Housing, Communities and Local Government stated that “it would be more appropriate to refer to leasehold tenure as ‘lease-rental’”. [11]
Leaseholders claim they were misled by developers’ marketing materials and sales staff who made no, or little, mention of the word “lease” or “leasehold” during the purchase process, this claim having been supported by the National Association of Estate Agents survey of 2018 which found that, amongst other things, “the language used in contracts is a ‘significant concern’, referring often to ‘virtual freehold’ which gives the buyer ‘the perception of total ownership, control and stability’”. [12]
The same report, “Leasehold: A Life Sentence”, advised that its survey of more than 1,100 [13] people who had bought a leasehold house within the previous 10 years showed that 94% [14] regretted buying a leasehold property; that 62% [15] felt they were mis-sold their home; that 57% [16] did not understand what it was to be a leaseholder until after they had "purchased" their property; and that there were dangers in "buyers" using lawyers recommended by developers, "buyers" thereby becoming involved in a “significant legal and financial risk without the right information or understanding”. [17]
Although developers say their customers are at all times fully informed of “the ownership structure” [18] of all new homes, in late 2018 numerous leaseholders advised the parliamentary Select Committee charged with looking into "Leasehold Reform" that when they asked developers for details they were directed to use the developers' "recommended solicitors" but that those solicitors then failed to reveal every facet of their purchases. [19]
Purchasers of leasehold houses say are fleeced by being legally obliged to pay further costs, such as the following.
When fleecehold is applied to leasehold flats, the flats are generally either in a new stand-alone block or in a group of new blocks, and either type may be part of new “mixed estates” (made up of either leasehold houses and leasehold flats, or of “freehold” houses and leasehold flats). Leasehold flat-owners say they are fleeced in many of the same ways as leasehold house-owners say they are fleeced. [27]
In 2016 the owner of a leasehold flat on a new development found that its ground-rent had been fixed so as to eventually cost £8,000 a year. Additionally, the flat could not be re-sold because some banks and building societies refused to grant mortgages to prospective buyers. [28]
Leasehold flat-owners must pay all or most of the additional charges which leasehold house-owners must pay, but must also pay an annual block charge for the maintenance of the internal common parts and exterior surfaces of the building in which their flats are situated. In 2017 the owners of three leasehold flats situated above a shop were issued with annual service charge bills requiring them to pay £7,682 each for the maintenance of a shared corridor and stairwell: this charge being made of the managing agent's fees and administrative costs, buildings insurance, testing and inspection of "landlord electrical circuits", the drawing up of a "planned preventative maintenance schedule", an annual health and safety audit and fire risk assessment, and £1,236 per year for weekly cleaning of the corridor and stairwell. [29]
Leaseholders are able to challenge their freeholder, but a freeholder may employ expensive legal teams to resist their demands, possibly resulting in the leaseholders having to pay a daunting legal bill. In one instance, a group of leasehold flat-owners challenging their wealthy freeholder faced having to pay a legal bill of around £500,000. [30]
Buyers of freehold houses on estates have said they were misled to believe they would own their properties outright, as if their properties were traditional freehold houses, but with regard to the external common parts of the estates on which their houses are situated they subsequently discovered they are tenants and are required to pay annual estate rentcharges, non-payment of which may result in action at county court level, a lease being placed on the house, bailiffs at the door, eviction, or the forfeiture of their homes. [31]
Information regarding service charges in developers’ marketing materials, and even in documentation provided by solicitors, has been found within several years of purchase to have significantly underestimated the amount charged annually, and not to have listed the many items which may eventually make up an annual rentcharge. [32] In 2011 freehold house-owners on an estate found that for the maintenance of a strip of roadside land 2 feet wide by 60 feet long each house had to contribute towards an estate charge of just under £6,000 a year, constituted by £1,900 for "maintenance of landscaped areas", £120 for "health and safety costs", £290 for "public liability insurance", £253 for "audit fees", and £3,255 for the agent's "management fee". [33]
Under current UK legislation the owners of freehold houses on estates have no option but to pay the rentcharge bills presented to them each year by managing agents. They have no legal right to question the accounts or even to be supplied with breakdowns and/or receipts for items making up their annual estate rentcharge. [34] If the owners of freehold houses wish to dispute charges they find that: whereas leaseholders who may take such a dispute to a tribunal for arbitration, there is no similar resolution service available to freeholders. [35] Freehold house-owners' only alternative is to take the matter to court, which few house-owners are able or willing to do. The UK's Right To Manage legislation [36] which allows home-owners to self-manage only applies to the owners of leasehold flats. [37].
"Freehold" house-owners on new estates perceive they are fleeced by legal arrangements made between developers and local councils before construction begins. By way of a Section 106 agreement a developer pays an agreed sum to a local council prior to construction according to certain conditions, such as that the developer takes responsibility for the maintenance of and the ownership of the external common parts of the new estate or that the developer will delegate it to a management company. [38] Because councils compete with each other to deliver large numbers of new homes, they seldom refuse developers’ recommendations that new housing be created on privately managed estates. [39] Developers benefit from Section 106 agreements by not having to ensure that estates are built to adoption standards and by being able to sell management contracts to residential managing agents, while councils, who seem willing to accept assurances by developers that new estates will be managed well, benefit by being freed of the traditional municipal responsibilities for maintaining such things as roads, pavements, lighting, and parkland. [40] Councils sometimes bind developers to agreements requiring that the owners of properties on estates are to be given ownership of their external common parts, but Section 106 agreements may also enable developers to cost-cut on building quality, to cram as many houses as they can onto estates, to skimp on the inclusion of estate amenities, to not include as many affordable homes as initially planned, and to choose not to subsequently offer the external common parts of estate to the council for adoption. [41]
Although developers have sometimes stated in purchase deeds that home-owners are eventually to self-manage, "freehold" house-owners have reported managing agents seeming to frustrate or delay the transfer of responsibility, in one instance insisting that certain Section 106 conditions were still to be met, although both the developer and the council had advised that they considered there were no Section 106 conditions outstanding. [42] However, in most instances "freehold" home-owners are unable to take possession of their external common parts as they are currently not provided with any legal mechanism by which they may terminate the managing agent’s contract and appoint an agent of their own choosing. In October 2017 Secretary of State for Housing, Sajid Javid, bemoaned the fact that “they [freehold house-owners on estates] have absolutely no say over who provides services and at what cost, and no way of taking over management themselves”. [43]
Once home-owners take ownership of the management company which owns their external common parts, they benefit from their homes being described as "Freehold houses with a share in the freehold of the common parts through the management company". [44]
Central to fleecehold is "The Private Estates Model" which since 2000 has become almost standard in the creation of new housing, such that when opening a Westminster debate on estate fees in January 2019, a Member of Parliament advised that, “A situation has arisen whereby the private estates model is rapidly becoming the norm for new developments, with those who have saved hard for their homes bearing an unfair burden and builders treating them as a cash cow”. [45]
Whereas historically developers paid lump sums to local authorities for the lifelong maintenance of the external common parts in new areas of housing, [46] the Private Estates Model entails local councils approving construction of estates for which such councils will have little or no on-going responsibility, followed by the developers frequently selling off management contracts for such estates to speculators and property management companies. [47] After the management contract for an estate is sold on there is no limit on what a new managing agent can charge for maintaining the external common parts of an estate. [48] Furthermore, if a managing agent comes to own (as well as manage) the external common parts of an estate, they cannot be dismissed as the estate's managers. [49] Worse still, the owner of the external common parts of an estate, known as "the rent-owner", [50] may exercise powerful legal rights over home-owners covenanted to pay the annual rentcharge: such that if a rentcharge has not been paid within 40 days of a deadline, and even if the payment has not been demanded, the rent-owner may place a lease on the property or take possession of it. [51]
While vulnerable to the powers of rent-owners, the owners of houses or flats on private estates are required to pay the same rates of council tax as are paid by people whose homes are not situated on private estates, [52] although by way of their rentcharges they must pay separately for repairs of such things as potholes and street lights [53] - even if their "private estate" is ungated and can easily be driven through by members of the public. On a new estate which has been set up as "a new town", home-owners have been charged, in addition to council tax and an estate rentcharge, a council tax surcharge (a "new town tax") of just under £400 for the maintenance of one specific element of their external common parts. [54]
The Home Owners Rights Network (Hornet), estimates that 87,000 households on UK estates are in dispute with managing agents, [55] and holds that councils should be required to compulsorily and retrospectively adopt private estates. [56] Hornet has made MPs aware that covenants in purchase deeds are often so unclear that home-owners do not become aware of rentcharges until they receive a bill, that agents are not obliged to justify such charges to home-owners, that such charges are uncapped, and that the residential property management industry is unregulated. [57] Hornet has produced the adjacent diagram showing how The Private Estates Model affects nearly all forms of new housing in the UK, and that the Residential Property Management Industry is central to the scheme. [58]
In October 2017 the Secretary of State for Housing, Communities & Local Government, Mr. Sajid Javid, told a conference of The Association of Residential Managing Agents (ARMA), [59] which says that it is the leading association for Residential Managing Agents in England and Wales, that "there’s no avoiding the fact that too many people in your industry are simply not good enough . . . Literally anyone can put on a suit, order some business cards, and call themselves a managing agent. You don’t have to any qualifications or experience, or a criminal records check". [60] The Institute of Residential Property Management (IRPM), [61] which says that it is “the leading professional body for residential property management professionals” in the UK has acknowledged, since Mr. Javid's speech, that the "Government is moving on its promise to regulate the agency and property management sectors and introduce a nationally recognised qualification." [62]
Councils throughout the United Kingdom have received substantial cuts to their annual funding from central government since the year 2001 to 2002, the cuts having been severe since the government began implementing its policy of intentional austerity in 2008, so that since 2010 to 2011, 79% of councils have reduced their housing spend, and a third have cut their housing spend by more than 50%. [63] In addition, councils say they can only take responsibility for maintaining the external common parts of new estates if developers request them to do so, but that developers do not do so. [64] However, as has been pointed out by a local government expert, councils seem content not to add to their responsibilities, [65] and councils have allowed central housing policies to be flouted to the benefit of wealthy investor-freeholders. [66]
Developers have stated that as local authorities confirm they are unable to adopt the external common parts of new estates, these need to be maintained by a management company, and that this is made clear at the point of reservation and throughout the home buying process, both to customers and to their independent legal advisors. [67] [68]
In February 2017 the Ministry of Housing, Communities & Local Government published a white paper called "Fixing our broken housing market", in which plans to reform the UK housing market were set out, acknowledging that “in areas where the housing shortage is most acute, high demand and low supply is creating opportunities for exploitation and abuse”. [69]
From July to September 2017, the government invited interested parties to participate in a consultation called "Tackling unfair practices in the leasehold market". The vast majority of the 6,000+ replies received were in favour of widespread reform of the selling of leasehold and freehold homes, in particular "introducing legislation to prohibit the development of new build [leasehold] houses; restricting ground rents in newly established leases of houses and flats to a peppercorn (zero financial value); and support for existing leaseholders, such as making buying a freehold or extending a lease easier, faster, fairer and cheaper". [70]
In December 2017 the government announced measures to remove unfair and abusive practices from the leasehold system, including a ban on leaseholds for almost all new-build houses. In the press release "Crackdown on unfair leasehold practices", the government said that its measures would include: [71]
Since July 2018 the Law Commission has been engaged in a “Leasehold Enfranchisement” project, [72] the final stage of which will be the publication in 2019 of a Final Report listing recommendations for legislative change.
In October 2018, the Ministry of Housing, Communities & Local Government’s Communities Secretary announced the launch of a further consultation [73] and said:
The announcement followed campaigning by The Leasehold Knowledge Partnership, The National Leasehold Campaign (13,768 members as of 10 April 2019), The Home Owners Rights Network (5,200 members as of 10 April 2019), The Home Owners Alliance, and others.
The consultation itself set out how the government intended to implement reforms concerning freehold houses so that "the maintenance of communal areas are fairer and more transparent". [74]
In March 2019 the Housing, Communities and Local Government Select Committee published a report in which it acknowledged multiple problems in the United Kingdom’s leasehold and freehold housing sectors and recommended wide-ranging changes. As well as the report [75], the Committee also published a summary [76], which includes several videos. Key recommendations of the report are as follows.
The committee also noted that “Developers denied that their sales teams deliberately misled leaseholders with partial sales information and false promises of purchasing their freeholds at an agreed price. But the number of near-identical stories from leaseholders reflects a serious cross-market failure of oversight of sales practices. Some affected leaseholders may have a strong claim that their properties were mis-sold. The Competition and Markets Authority should investigate mis-selling in the leasehold sector within the next six months and, where appropriate, make recommendations for appropriate compensation, with the option of enfranchisement”. [87] In addition, the committee noted that “too often leaseholders, particularly in new-build properties, have been treated by developers, freeholders and managing agents, not as homeowners or customers, but as a source of steady profit”. [88]
With regard to freehold houses on estates, the committee recommended:
On 28 March 2019 the Ministry of Housing, Communities and Local Government announced that approximately 40 leading property developers and investor-freeholders had signed an "industry pledge" “to crack down on toxic leasehold deals”, [92] promising to free existing leaseholders trapped in onerous deals, to close legal loopholes which force leaseholders to pay unjustified legal fees, and to make retirement property fees more transparent. However, campaigners were swift to dismiss the pledge as insufficient, insisting that the government must legislate to make illegal a wide range of the practices of developers and managing agents. [93]
As of early April 2019 the government’s plans remain aspirational. [94]
The following sources are presented in chronological order, and so can be read as a history of events relevant to rise of the use of the term fleecehold.
A Fleecehold is a jocular term used to describe the marketing of tenure on land. Unsuspecting, naïve, gullible, or aspirational homeowners might buy this tenure thinking that they have an asset, but who in fact have purchased a debt or obligation. The situation typically applies to:
The term arose in 2016; by 2018 it was used in a report of the Law Commission (England and Wales) which recommends new laws for adoption by Parliament, in the sense of "freehold properties that are acquired subject to onerous terms". [1]
The term fleecehold is used [2] to describe a number of tenure situations in the United Kingdom’s new-homes sector. The term arose in 2016 when campaigners [3] merged the words freehold, leasehold, and fleece, to suggest that sales of certain types of new homes involved fleecing, the "fleecing" being referenced meaning, “to defraud or charge exorbitantly; swindle". [4] Home-owners began to tell Members of Parliament that they had not been fully informed prior to purchase [5] and that they had been mis-sold their homes. [6] By 2017 "fleecehold" was being widely used by those affected and in industries related to the new housing sector. [7] By September 2018 the Law Commission, which recommends new laws to Parliament, had used the term in its document "Will our provisional proposals solve the ‘fleecehold’ problem?" [1]
The term fleecehold has been applied to the following forms of tenure: [8]
Buyers of such homes (and their supporters) say that although they passed through processes much the same as those associated with purchasing a home outright, they do not in fact own their homes outright. [9]
The term “fleecehold” is used when buyers of new leasehold houses find they are actually tenants living in properties subject to charges which “fleece” them for significant sums of money annually, incrementally, or on specific one-off occasions. [10] In March 2019 the Select Committee of The Ministry of Housing, Communities and Local Government stated that “it would be more appropriate to refer to leasehold tenure as ‘lease-rental’”. [11]
Leaseholders claim they were misled by developers’ marketing materials and sales staff who made no, or little, mention of the word “lease” or “leasehold” during the purchase process, this claim having been supported by the National Association of Estate Agents survey of 2018 which found that, amongst other things, “the language used in contracts is a ‘significant concern’, referring often to ‘virtual freehold’ which gives the buyer ‘the perception of total ownership, control and stability’”. [12]
The same report, “Leasehold: A Life Sentence”, advised that its survey of more than 1,100 [13] people who had bought a leasehold house within the previous 10 years showed that 94% [14] regretted buying a leasehold property; that 62% [15] felt they were mis-sold their home; that 57% [16] did not understand what it was to be a leaseholder until after they had "purchased" their property; and that there were dangers in "buyers" using lawyers recommended by developers, "buyers" thereby becoming involved in a “significant legal and financial risk without the right information or understanding”. [17]
Although developers say their customers are at all times fully informed of “the ownership structure” [18] of all new homes, in late 2018 numerous leaseholders advised the parliamentary Select Committee charged with looking into "Leasehold Reform" that when they asked developers for details they were directed to use the developers' "recommended solicitors" but that those solicitors then failed to reveal every facet of their purchases. [19]
Purchasers of leasehold houses say are fleeced by being legally obliged to pay further costs, such as the following.
When fleecehold is applied to leasehold flats, the flats are generally either in a new stand-alone block or in a group of new blocks, and either type may be part of new “mixed estates” (made up of either leasehold houses and leasehold flats, or of “freehold” houses and leasehold flats). Leasehold flat-owners say they are fleeced in many of the same ways as leasehold house-owners say they are fleeced. [27]
In 2016 the owner of a leasehold flat on a new development found that its ground-rent had been fixed so as to eventually cost £8,000 a year. Additionally, the flat could not be re-sold because some banks and building societies refused to grant mortgages to prospective buyers. [28]
Leasehold flat-owners must pay all or most of the additional charges which leasehold house-owners must pay, but must also pay an annual block charge for the maintenance of the internal common parts and exterior surfaces of the building in which their flats are situated. In 2017 the owners of three leasehold flats situated above a shop were issued with annual service charge bills requiring them to pay £7,682 each for the maintenance of a shared corridor and stairwell: this charge being made of the managing agent's fees and administrative costs, buildings insurance, testing and inspection of "landlord electrical circuits", the drawing up of a "planned preventative maintenance schedule", an annual health and safety audit and fire risk assessment, and £1,236 per year for weekly cleaning of the corridor and stairwell. [29]
Leaseholders are able to challenge their freeholder, but a freeholder may employ expensive legal teams to resist their demands, possibly resulting in the leaseholders having to pay a daunting legal bill. In one instance, a group of leasehold flat-owners challenging their wealthy freeholder faced having to pay a legal bill of around £500,000. [30]
Buyers of freehold houses on estates have said they were misled to believe they would own their properties outright, as if their properties were traditional freehold houses, but with regard to the external common parts of the estates on which their houses are situated they subsequently discovered they are tenants and are required to pay annual estate rentcharges, non-payment of which may result in action at county court level, a lease being placed on the house, bailiffs at the door, eviction, or the forfeiture of their homes. [31]
Information regarding service charges in developers’ marketing materials, and even in documentation provided by solicitors, has been found within several years of purchase to have significantly underestimated the amount charged annually, and not to have listed the many items which may eventually make up an annual rentcharge. [32] In 2011 freehold house-owners on an estate found that for the maintenance of a strip of roadside land 2 feet wide by 60 feet long each house had to contribute towards an estate charge of just under £6,000 a year, constituted by £1,900 for "maintenance of landscaped areas", £120 for "health and safety costs", £290 for "public liability insurance", £253 for "audit fees", and £3,255 for the agent's "management fee". [33]
Under current UK legislation the owners of freehold houses on estates have no option but to pay the rentcharge bills presented to them each year by managing agents. They have no legal right to question the accounts or even to be supplied with breakdowns and/or receipts for items making up their annual estate rentcharge. [34] If the owners of freehold houses wish to dispute charges they find that: whereas leaseholders who may take such a dispute to a tribunal for arbitration, there is no similar resolution service available to freeholders. [35] Freehold house-owners' only alternative is to take the matter to court, which few house-owners are able or willing to do. The UK's Right To Manage legislation [36] which allows home-owners to self-manage only applies to the owners of leasehold flats. [37].
"Freehold" house-owners on new estates perceive they are fleeced by legal arrangements made between developers and local councils before construction begins. By way of a Section 106 agreement a developer pays an agreed sum to a local council prior to construction according to certain conditions, such as that the developer takes responsibility for the maintenance of and the ownership of the external common parts of the new estate or that the developer will delegate it to a management company. [38] Because councils compete with each other to deliver large numbers of new homes, they seldom refuse developers’ recommendations that new housing be created on privately managed estates. [39] Developers benefit from Section 106 agreements by not having to ensure that estates are built to adoption standards and by being able to sell management contracts to residential managing agents, while councils, who seem willing to accept assurances by developers that new estates will be managed well, benefit by being freed of the traditional municipal responsibilities for maintaining such things as roads, pavements, lighting, and parkland. [40] Councils sometimes bind developers to agreements requiring that the owners of properties on estates are to be given ownership of their external common parts, but Section 106 agreements may also enable developers to cost-cut on building quality, to cram as many houses as they can onto estates, to skimp on the inclusion of estate amenities, to not include as many affordable homes as initially planned, and to choose not to subsequently offer the external common parts of estate to the council for adoption. [41]
Although developers have sometimes stated in purchase deeds that home-owners are eventually to self-manage, "freehold" house-owners have reported managing agents seeming to frustrate or delay the transfer of responsibility, in one instance insisting that certain Section 106 conditions were still to be met, although both the developer and the council had advised that they considered there were no Section 106 conditions outstanding. [42] However, in most instances "freehold" home-owners are unable to take possession of their external common parts as they are currently not provided with any legal mechanism by which they may terminate the managing agent’s contract and appoint an agent of their own choosing. In October 2017 Secretary of State for Housing, Sajid Javid, bemoaned the fact that “they [freehold house-owners on estates] have absolutely no say over who provides services and at what cost, and no way of taking over management themselves”. [43]
Once home-owners take ownership of the management company which owns their external common parts, they benefit from their homes being described as "Freehold houses with a share in the freehold of the common parts through the management company". [44]
Central to fleecehold is "The Private Estates Model" which since 2000 has become almost standard in the creation of new housing, such that when opening a Westminster debate on estate fees in January 2019, a Member of Parliament advised that, “A situation has arisen whereby the private estates model is rapidly becoming the norm for new developments, with those who have saved hard for their homes bearing an unfair burden and builders treating them as a cash cow”. [45]
Whereas historically developers paid lump sums to local authorities for the lifelong maintenance of the external common parts in new areas of housing, [46] the Private Estates Model entails local councils approving construction of estates for which such councils will have little or no on-going responsibility, followed by the developers frequently selling off management contracts for such estates to speculators and property management companies. [47] After the management contract for an estate is sold on there is no limit on what a new managing agent can charge for maintaining the external common parts of an estate. [48] Furthermore, if a managing agent comes to own (as well as manage) the external common parts of an estate, they cannot be dismissed as the estate's managers. [49] Worse still, the owner of the external common parts of an estate, known as "the rent-owner", [50] may exercise powerful legal rights over home-owners covenanted to pay the annual rentcharge: such that if a rentcharge has not been paid within 40 days of a deadline, and even if the payment has not been demanded, the rent-owner may place a lease on the property or take possession of it. [51]
While vulnerable to the powers of rent-owners, the owners of houses or flats on private estates are required to pay the same rates of council tax as are paid by people whose homes are not situated on private estates, [52] although by way of their rentcharges they must pay separately for repairs of such things as potholes and street lights [53] - even if their "private estate" is ungated and can easily be driven through by members of the public. On a new estate which has been set up as "a new town", home-owners have been charged, in addition to council tax and an estate rentcharge, a council tax surcharge (a "new town tax") of just under £400 for the maintenance of one specific element of their external common parts. [54]
The Home Owners Rights Network (Hornet), estimates that 87,000 households on UK estates are in dispute with managing agents, [55] and holds that councils should be required to compulsorily and retrospectively adopt private estates. [56] Hornet has made MPs aware that covenants in purchase deeds are often so unclear that home-owners do not become aware of rentcharges until they receive a bill, that agents are not obliged to justify such charges to home-owners, that such charges are uncapped, and that the residential property management industry is unregulated. [57] Hornet has produced the adjacent diagram showing how The Private Estates Model affects nearly all forms of new housing in the UK, and that the Residential Property Management Industry is central to the scheme. [58]
In October 2017 the Secretary of State for Housing, Communities & Local Government, Mr. Sajid Javid, told a conference of The Association of Residential Managing Agents (ARMA), [59] which says that it is the leading association for Residential Managing Agents in England and Wales, that "there’s no avoiding the fact that too many people in your industry are simply not good enough . . . Literally anyone can put on a suit, order some business cards, and call themselves a managing agent. You don’t have to any qualifications or experience, or a criminal records check". [60] The Institute of Residential Property Management (IRPM), [61] which says that it is “the leading professional body for residential property management professionals” in the UK has acknowledged, since Mr. Javid's speech, that the "Government is moving on its promise to regulate the agency and property management sectors and introduce a nationally recognised qualification." [62]
Councils throughout the United Kingdom have received substantial cuts to their annual funding from central government since the year 2001 to 2002, the cuts having been severe since the government began implementing its policy of intentional austerity in 2008, so that since 2010 to 2011, 79% of councils have reduced their housing spend, and a third have cut their housing spend by more than 50%. [63] In addition, councils say they can only take responsibility for maintaining the external common parts of new estates if developers request them to do so, but that developers do not do so. [64] However, as has been pointed out by a local government expert, councils seem content not to add to their responsibilities, [65] and councils have allowed central housing policies to be flouted to the benefit of wealthy investor-freeholders. [66]
Developers have stated that as local authorities confirm they are unable to adopt the external common parts of new estates, these need to be maintained by a management company, and that this is made clear at the point of reservation and throughout the home buying process, both to customers and to their independent legal advisors. [67] [68]
In February 2017 the Ministry of Housing, Communities & Local Government published a white paper called "Fixing our broken housing market", in which plans to reform the UK housing market were set out, acknowledging that “in areas where the housing shortage is most acute, high demand and low supply is creating opportunities for exploitation and abuse”. [69]
From July to September 2017, the government invited interested parties to participate in a consultation called "Tackling unfair practices in the leasehold market". The vast majority of the 6,000+ replies received were in favour of widespread reform of the selling of leasehold and freehold homes, in particular "introducing legislation to prohibit the development of new build [leasehold] houses; restricting ground rents in newly established leases of houses and flats to a peppercorn (zero financial value); and support for existing leaseholders, such as making buying a freehold or extending a lease easier, faster, fairer and cheaper". [70]
In December 2017 the government announced measures to remove unfair and abusive practices from the leasehold system, including a ban on leaseholds for almost all new-build houses. In the press release "Crackdown on unfair leasehold practices", the government said that its measures would include: [71]
Since July 2018 the Law Commission has been engaged in a “Leasehold Enfranchisement” project, [72] the final stage of which will be the publication in 2019 of a Final Report listing recommendations for legislative change.
In October 2018, the Ministry of Housing, Communities & Local Government’s Communities Secretary announced the launch of a further consultation [73] and said:
The announcement followed campaigning by The Leasehold Knowledge Partnership, The National Leasehold Campaign (13,768 members as of 10 April 2019), The Home Owners Rights Network (5,200 members as of 10 April 2019), The Home Owners Alliance, and others.
The consultation itself set out how the government intended to implement reforms concerning freehold houses so that "the maintenance of communal areas are fairer and more transparent". [74]
In March 2019 the Housing, Communities and Local Government Select Committee published a report in which it acknowledged multiple problems in the United Kingdom’s leasehold and freehold housing sectors and recommended wide-ranging changes. As well as the report [75], the Committee also published a summary [76], which includes several videos. Key recommendations of the report are as follows.
The committee also noted that “Developers denied that their sales teams deliberately misled leaseholders with partial sales information and false promises of purchasing their freeholds at an agreed price. But the number of near-identical stories from leaseholders reflects a serious cross-market failure of oversight of sales practices. Some affected leaseholders may have a strong claim that their properties were mis-sold. The Competition and Markets Authority should investigate mis-selling in the leasehold sector within the next six months and, where appropriate, make recommendations for appropriate compensation, with the option of enfranchisement”. [87] In addition, the committee noted that “too often leaseholders, particularly in new-build properties, have been treated by developers, freeholders and managing agents, not as homeowners or customers, but as a source of steady profit”. [88]
With regard to freehold houses on estates, the committee recommended:
On 28 March 2019 the Ministry of Housing, Communities and Local Government announced that approximately 40 leading property developers and investor-freeholders had signed an "industry pledge" “to crack down on toxic leasehold deals”, [92] promising to free existing leaseholders trapped in onerous deals, to close legal loopholes which force leaseholders to pay unjustified legal fees, and to make retirement property fees more transparent. However, campaigners were swift to dismiss the pledge as insufficient, insisting that the government must legislate to make illegal a wide range of the practices of developers and managing agents. [93]
As of early April 2019 the government’s plans remain aspirational. [94]
The following sources are presented in chronological order, and so can be read as a history of events relevant to rise of the use of the term fleecehold.