Written evidence submitted by Stephen Woolley [LHR 150]
1.1 I am writing on behalf of Gin Pit Residents Association in Astley, Wigan. Gin Pit is a development of 153 units of both houses and apartments. All properties have been sold on a leasehold of 250 years. The development was completed c2.5 years ago. The Residents Association represents 130 residents and 100 units – two thirds of properties on the development.
1.2 The developer Ben Bailey later Avant Homes sold the freehold to Aviva Investors Ground Rent GP and Aviva Investors Ground Rent Holdco Ltd as trustees for Aviva Investors ReaLM Ground Rent Limited or “Aviva”. Aviva then appointed Mainstay Residential Limited as the management company for the Gin Pit development.
1.3 The Ground Rent charged was reviewed on 1st January 2017, which increased the Ground Rent payable by 24.7%. The next Ground Rent review will be 31st December 2026.
1.4 As a condition of the lease terms all house leaseholders and those residents who have bought the leasehold have to pay an Estate Charge to Mainstay, with no access to Right to Manage.
2.1 Although the Government’s proposal to end the unnecessary and exploitative leaseholds for new new properties is welcome, this does not benefit and may indeed be to the detriment of existing leaseholders. In many ways this will leave householders in our position (recent leaseholders the proposals will not apply too) with properties that carry more of a financial liability than newer properties and potentially in a position that will affect the saleability of our properties.
2.2 There is no justifiable reason for properties on this development to be leasehold, the new build prices were not lower than similar properties that have been sold on a freehold basis. Applying leasehold tenure is simply a way for the developer to secure additional income that can then be sold on to investors.
2.3 A further concern is that as a condition of the leasehold, Aviva appointed Mainstay Residential Ltd as the Management Company for the development. Although apartments on the development can and have exercised their Right to Manage, residents in houses do not have the right to exercise the same.
2.4 Mainstay have responsibility for a small amount of gardening and boundary maintenance on the development, maintenance of shared car parks some residents have access to and of any of the four apartment blocks that have not exercised their right to manage. Residents who have bought out their leasehold or apartment residents that have exercised their right to manage still have to pay an estate charge to Mainstay.
2.5 Mainstay provide a very poor level of maintenance, in some cases not addressing maintenance issues that were raised up to four years ago. They very rarely respond to queries or complaints, leaving residents with little recourse.
2.5 Any alterations to properties have to be approved at a cost by Mainstay. This includes where alterations such as small extensions or conservatories come under permitted development by the local planning authority.
2.6 Mainstay charge an annual management or administration fee of £52 per property, in some cases this is almost 50% of the overall annual estate charge, and are now demanding additional costs for maintenance that should be covered by the £21,000 of relevant reserves or sinking funds they hold for the development. A recent example being an additional estate charge cost of more than £400 to reattach a single wooden fence panel, with the fencer appointed by Mainstay travelling from Bradford in West Yorkshire, 43 miles from our development.
2.7 As leasehold householders, we feel held to ransom by a Management Company that can and does charge arbitrary fees and costs. We have no access to Right to Manage and do not have any right to challenge the landlord Aviva’s appointment of Mainstay. Indeed, even for those of us that have bought the lease from the landlord or have exercised right to manage in apartments, have no recourse to appoint a more reasonable management company to maintain the shared areas of the development.
2.8 The fact that the leaseholders have to seek the permission of the management company for any alterations that are within permitted development rules of the local planning authority, and the fact that the management company charges to make that decision is bizarre, and seems to undermine the role of local planning authorities. We would like to see this practice stopped.
2.9 Although we understand that applying the same ban on new leaseholds to existing leaseholds may not be possible, there is no justifiable reason for these to exist as they do not represent any form of discount on the new house prices. We would like to see the value of the ground rents charged to leaseholds of flats and houses on mixed unit developments reduced to a nominal amount. We would like to see valuation of long leaseholds to be no more than 10 time annual ground rent or less. This would reduce the value of the lease allowing leaseholders to buy the lease and go in some part to levelling the playing field for all leaseholders regardless of when their development was completed.
2.10 In addition, we would like to see Right to Manage made available to all householders, to allow residents associations like ours to appoint our own Management Company, and in turn putting money into the local economy by using local sub-contractors.
3.1 Although this is addressed in part above, our experience of an unchallengeable 24.7% increase in the ground rent within a few years of the development being complete feels unjustifiable. Our ground rent is not as significant as for other leaseholders elsewhere in the country – measured in the hundreds rather than thousands of pounds, however this can be nothing more than profiteering for the landlord which does nothing to “earn” this increase.
3.2 We would like to see legislation that would see increases in ground rent capped to a nominal increase, with reviews no less than 10 years and the value of long leaseholds to be no more than 10 times annual ground rent or less.
4.1 The current proposals to ban new leaseholds will distort local housing markets, potentially making identical properties bought a matter of months or a few years before the new ban come into force lose value, reduce their saleability and even push leaseholders into negative equity as buyers will understandably want to purchase freehold properties.
4.2 Realistically, long leaseholders in this position will have no choice other than to buy the leasehold at substantial cost in order to sell their properties, an unfair penalty, and one that will not fix the issue of the landlord appointing bad managing companies on developments with shared maintenance requirements, with no consultation with the residents impacted.
4.3 It is worth noting that many leaseholders were very badly advised when purchasing their new build properties, usually by conveyancing solicitors developers required the purchaser to use.
4.4 Legislating to reduce the value of ground rents on relatively new developments and the subsequent reduction in the value of the leasehold will help to make balance the potential unintended consequences of banning new leaseholds, allowing leaseholders to purchase their lease at a low or nominal amount.
4.5 Right to manage should be made available to all residents of newer developments with a residents association representing more than 50% of the units regardless of those units being flats or houses.