Money: The best laid plans can turn to rubble

Your family may have lived in the same house since the beginning of the century, but it's all for nothing if the lease is about to run out.
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I want a fair and simpler process. I think the leasehold system should go. When you buy a house or flat, you should be buying the ground it stands on, the two parts of the property can't be separated. Once you buy, the property should be yours." So says Glenys Bridges, who is battling to retain the home in South Wales that her family has lived in since the beginning of this century.

Ms Bridges' mother died in June this year. It was only when she was going through the papers after her mother's death that she discovered the lease on the family home is due to expire in September next year. "I'm angry with the law as it stands. I wasn't living in the house and you can't go to a Leasehold Valuation Tribunal if you have not been a resident for the three years immediately preceding the application."

Her grandfather first moved into the house in 1909 and rented the property from the leaseholder until he passed away in 1946. Her mother then took over the rent until deciding to buy the family home in 1963. It had 36 years left on the lease and she did not seek an extension or purchase the freehold.

Ms Bridges says: "Many older people don't understand the leasehold system, and the whole notion of dealing with solicitors is not something they would do. My mother never went out to work and going to a solicitor wasn't in her or my father's domain before he passed away. She didn't understand the complexities of freehold and thought that me and my sister would receive the family home on her death."

She has approached the freeholder in an attempt to buy the property and has been quoted the sum of pounds 27,500 which is more than the average small terraced house in this depressed area is selling for at present, according to her valuer.

"If I had lived in the house in five out of the past 10 years, I could have applied to go through the enfranchisement process, but I haven't. I think my mother would have acted if she had been alerted to how the freehold system works and if the process was simpler and cheaper to carry out. My mother was a frail old woman in her last few years and wasn't able to do anything that took much effort."

Ms Bridges would buy the house if it was sold for what she believes is a "reasonable sum of money", taking into account that her parents put much of their savings into the property. She wants the Government to put a stop to people buying up freeholds, collecting ground rent and then waiting for a lease to expire so they can "scoop the pools". But it is uncertain whether the Government's heralded overhaul of the leasehold system will manage to tackle this type of problem in the short term.

However, Hilary Armstrong, the Minister for Housing, told a conference held by the Association of Residential Managing Agents a few days ago that the overall objective of leasehold reform "is to provide leaseholders with the opportunity to reap the full benefits of owner occupation and, individually or collectively, to have control over the way in which their homes are managed."

Ms Armstrong said one key purpose is to make it easier for leaseholders to buy the freehold of their homes: "The existing eligibility rules for enfranchisement are hard to understand and can be difficult to meet in the case of flats. The whole procedure gives landlords who have ready access to professional advice an unfair advantage. The basis for determining the price is complex and open to argument. This leads to uncertainty for prospective purchasers over the eventual cost which can often deter leaseholders from getting involved in the enfranchisement process."

She stressed that the Government remains committed to introducing a new form of tenure called "commonhold," giving leaseholders the freehold of the property on which their flat stands. However, Ms Armstrong added that "this is an ideal long-term goal" and later went on to say that commonhold would initially be available to new developments but that the Government would also be looking at how leaseholders could convert to commonhold status.

Leaseholders may also be given the right to manage their own block without the need to prove neglect by the existing management. She added that the Government is "considering whether there should be some form of control over managing agents and landlords who manage their own properties". The latter is likely to be the key to the whole process because the danger, as some newly enfranchised leaseholders have found, is that they find themselves with an unscrupulous board of leasehold directors running the newly formed freehold company.

This new breed of "leasehold landlords" may inflate service charges for their own gain, present service charge accounts in a misleading fashion and fail to provide the full set of accounts leaseholders or Companies House requires under legislation. They may also fail to provide access to the "full and complete set of invoices and receipts" for every item of expenditure on the service charge accounts, which can run into thousands of pounds. In other cases, they fail to carry out the legal procedure for consultation over building works and refuse to hold annual general meetings.

The Government may introduce strict regulation which applies in the same way to newly enfranchised "leasehold landlords" and any other type of landlord or managing agent in an effort to clamp down on the unscrupulous. But in order to work, the regulator needs power, not only to impose fines and strike people off a register, so that they can no longer operate, but also the power to imprison the worst offenders. Legislation must, at the same time, be strengthened to eliminate as much interpretation as possible, ensure full disclosure of every penny spent and create transparency of information.

Karen Woolfson welcomes comments for her column. Write to: Homebattles, c/o Nic Cicutti, Personal Finance section, `The Independent', 1 Canada Square, Canary Wharf, London E14 5DL. She regrets she is unable to reply personally to all letters.