2023-07-10 04:31:28
Norberto ParedesBBC News Mundo
July 10, 2023, 02:31 GMT
image copyrightGetty Images
The main concerns when buying a house in most countries of the world are raising enough money and finding 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 property on lease for a certain period of time, several decades in general, and does not become the owner of the land where it is located.
You generally must ask the land owner for permission to carry out any redevelopment work and pay an annual rent for the land, known as a ground rent.
In many cases, this rent is symbolic: a “peppercorn”, a metaphor used in English law to refer to a very small cash payment.
But in others it becomes so expensive that homeowners end up selling their home because they can’t keep paying for it.
It is estimated that 20% of properties in England are under the leasehold system, most of them apartments.
Caption,
Most of the apartments sold with leases are in cities.
A long list of problems
“Basically if you own a freehold you own what is below the ground and everything that is above in the air, while the leasehold was created so that two or more people can own different properties one on top of the other “, the 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 that it “has a lot of flaws.”
“It has created systematic power mismatches that don’t benefit buyers. It’s something that has no place in a modern society,” Zoltaniecka says.
“Excessive feudal rents, very high maintenance fees, mismanagement of buildings that often put the safety of the owners at risk, properties that depreciate dramatically because their leasehold is already running out. The list of problems associated with the system is very long “he adds.
image copyrightGetty Images
A medieval system
It is a system that has its origin in the Middle Ages.
“It is a feudal and medieval system. In its origins, 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.
Starting in the 1920s, various laws were introduced to limit the rents that landowners could collect and restrict their right to evict tenants.
Many of these owners 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.
The 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, beginning in the 1960s there were changes to 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.
Lack of transparency
image copyrightBBC Mundo
Caption,
Joe Douglas.
Despite this, many leasehold apartment owners complain that they are overcharged for repairs and maintenance of the common areas of the buildings in which they live and that they face disproportionate rent increases for land on which their houses rise.
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.
He also remembers how that happiness quickly turned into anxiety and ended in a nightmare.
After selling all the apartments, the developer sold the land and the building to an investment fund, causing Joe’s house to depreciate instantly.
Now he has to pay more than $5,000 a year to maintain an apartment that he is supposed to own.
“I feel cheated. I moved to my wife’s two years ago, so I don’t even live there anymore,” the young man told BBC Mundo.
Joe pays about $2,900 a year in 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.
“It’s a lot of money. In the case of insurance, the landowners bill me without any 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 is that you become a prisoner of a system, that you don’t have any type of right, nor do you know if you might be enriching someone who is taking advantage of your situation,” he adds. the young man.
image copyrightGetty Images
Limited Time Owners
Currently, when a property is first sold on 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.
Leasehold holders can extend the lease or buy their home outright, but it is a process that can be complicated and very expensive.
If they don’t extend the lease, the property owner loses their home, which goes back to the land owner.
In recent years, large homebuilders in England have sold properties under 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 contract with a minimum of 21 years remaining is exempt from paying that annual land rent.
However, this does not apply to homes that were purchased before that date: millions across the country that have become a liability to buyers and, like Joe’s, can be extremely difficult to sell.
image copyrightGetty Images
Reverse
For years, organizations like Commonhold Now have encouraged authorities to do away with the leasehold system.
Britain’s Home Secretary, Michael Gove, has criticized it on several occasions, describing it as “unfair and outdated”.
In January this year it said it 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, due to be published later this year, will not specify a date for ending leaseholds.
“The government has backtracked in its decision to abolish it,” laments Karolina Zoltaniecka of the organization Commonhold Now.
“Now they say that 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 it needs to be abolished completely.”
Expert Saul Gerrand says the plans to abolish the leasehold are “altruistic,” but he’s not sure they’re realistic.
“The alternative is to create a ‘commonhold’ 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 “just another prisoner of the system.”
“I feel like my prison has become a money 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.”
Now you can receive notifications from BBC Mundo. Download the new version of our app and activate them so you don’t miss out on our best content.
#Leasehold #feudal #system #millions #people #England #land #houses