Business 22 August 2013 When you buy a London flat, you're not really becoming an owner The weird reality of leaseholds. Print HTML Instead of buying a property, how about renting one? Only this will be a rental deal with a difference: I am going to make you sign a 100-year contract and demand that you pay the vast majority of the rent upfront. If any repairs need doing, of course I’ll arrange them for you. But I’m going to send you the bill. You want to argue? If you don’t pay, I am going to rip up the rental contract and you are going to lose all that money you paid upfront. Does that sound appealing? It is really just another way of describing leasehold, the form of property "ownership" which is almost universal in apartment buildings in England and yet hardly exists elsewhere on Earth. London boasts some of the world’s highest property prices, and yet many buyers are only vaguely aware that when they buy a flat — whether for £200,000 or £20m — they are not really becoming property owners at all. "But I am the owner," one buyer recently protested to me after seeing himself described as a "tenant" in his deeds. Oh no you’re not, I had to tell him. You’ve got 125 years of happy renting ahead of you. Leasehold is the basis of some of the largest private fortunes in Britain. The Duke of Westminster would be just another hard-up English aristocrat had his forbears sold off the freeholds of the properties built on their estate 200 years ago. Selling leases instead enabled the Grosvenor family to take money from the sales and yet continue to retain an interest in hundreds of properties in a prime central London residential district. Yet leasehold seems increasingly incongruous with the present-day London property market. Billionaires, the representatives of global capitalism, can find themselves the tenants of English aristocrats, or quite possibly the tenants of a fly-by-night company operating from above a chip shop in north London. Freeholds are sometimes worth much less than the value of individual flats, with the result they can end up in the hands of small-time property barons with devious ways of squeezing money from their tenants. Like all landlord-tenant relationships, that between freeholder and leaseholder is apt to go horribly wrong. And it isn’t just a case of people on the lowest rung of home ownership who find themselves being exploited by unscrupulous landlords. You can find hornets’ nests of anger and resentment in some of the poshest addresses in London. In one case in Knightsbridge, flat-owners were each sent a demand for £14,000 for "major works" to the roof. If you totted up the contributions which had been asked of all leaseholders, it came to an astronomical sum way beyond anything which might reasonably have been spent on repairing a roof. What the money was really for, the leaseholders later found out, was building an extra two flats on the roof — which the freeholder was then going to sell entirely for his own benefit. Most disputes between leaseholders and freeholders are for the same reason: excessive service charges. It is all too easy for freeholders to jack up the cost of repairs: add 15 per cent here and 20 per cent there. In some cases the costs end up being ridiculous: the tenant of a one-bedroom flat in Oxford ended up paying £9,300 a year. The value of the flat, as a result of the service charges, had fallen to just £15,000. But in most cases of excessive charging, fees are pushed up to a level at which the leaseholder might groan yet not be quite moved to complain. Typical is the block of flats where leaseholders found 33 per cent was being added to their building insurance. How would you know you were being overcharged, without shopping around for insurance yourself? Landlords are not supposed to exploit their leaseholders, and there are provisions in law to prevent them doing so. Leasehold Valuation Tribunals exist in order to settle disputes between the two parties. But in practice few leaseholders get round to challenging excessive charges; indeed, the process of doing so is itself expensive. Most quietly pay up or sell up, knowing that if they kick up a stink it will make it more difficult for them to sell their property. The Leasehold and Commonhold Reform Act 2002 seemed initially to ring the death knell for leasehold. It enhanced powers that leaseholders already enjoyed: to exercise their collective right to buy the freehold of the buildings in which their flats are situated. In addition, it created a new form of tenure — commonhold — much more like the condominiums common in the US and many other countries. Under commonhold, owners of individual flats would jointly own the entire building. A decade on from the Act, there are still only a dozen commonhold developments in England. Nor has there been any great uptake of enhanced powers of ‘enfranchisement’ — a term used to describe the joint purchase of a freehold by the leaseholders. One of the reasons for this is that it can take an extraordinary effort to gather the leaseholders and persuade them to agree to exercise their rights. The law requires at least 50 per cent of leaseholders to agree to the action. Knocking on doors is rarely successful: in a typical London block a large number of the leaseholders do not live in their flats. To contact them it may be necessary to trawl through the Land Registry. And even then it is quite likely that you will find flats that are owned by companies registered abroad. Leaseholders who want to buy their way out of the system have to be prepared for a long and expensive battle: under the rules, leaseholders are liable to pay the landlord’s legal costs as well as their own. In one recent case in east London leaseholders succeeded in buying their freehold for £404,000, after suffering years of exaggerated service charges. The overcharging wasn’t quite finished, though: they found themselves having to pay another £169,000 in legal costs. It is inertia that keeps leasehold going. Perhaps the London property boom will carry on for so long that buyers won’t worry too much about it. When you expect to make tens if not hundreds of thousands of pounds on the value of your lease, you might not care about a service charge that that is hundreds of pounds too high. It might be a different story if prices began to slide and owners were suddenly faced with the prospect of losing money. They might then begin to see themselves for what they really are: just like other tenants, paying through the nose to keep their landlord in fine wine. This piece first appeared on Spears magazine. › John Kerry needs to understand day-to-day life in the West Bank is there is to be any hope of peace A hotel in Mayfair. Photograph: Getty Images Ross Clark is a writer for Spear's Magazine More Related articles The Living Wage: an idea whose time has come Artemis Monthly Distribution Fund A wage rise isn't enough to combat poverty - you need tax credits, too
Show Hide image The Staggers 4 November 2015 Enough handwringing - here's something that could actually be done to help Europe's refugees We need to move on from being upset - to getting stuff done, says Richard Howitt MEP. Print HTML The real victims of the refugee crisis engulfing Europe are neither statistics nor pawns in a geopolitical game. The shameful spectacle of hand-wringing then hand-washing in the face of the mass exodus of Syrian refugees cries out for fresh thinking, and a visit to meet refugees themselves in their makeshift camps on the borders of the war zone in neighbouring Lebanon might well be the starting point in which to discover new ideas. Just thirty minutes from the Syrian border in the Bekaa Valley, refugee Mohammed tells me how he fled from ISIS fearing his son's life, by-passing our Arabic interpreter by hand gesturing the cutting of his own throat to impress on me the urgency of their escape. Later at the El-Hilweh camp in the south of the country, refugee Etaf tells me she spent twelve hours watching her daughter bleed to death. Both of them said they would move to Europe. To demonstrate the futility of simply seeking to prevent them doing so, Etaf adds: "I want to go to sea and to die there. I am desperate." That is the case for creating “safe routes”. One of the popular bits of jargon in the debate about the refugee crisis back in Europe, is "responsibility sharing." But what would that mean in practice when viewed from Lebanon? More than one million refugees have arrived in the country, now numbering one for every three Lebanese people, the fastest rate of population increase of any country in world history. It is a country without a functioning government because of inter-religious tensions, with rubbish piling up on the streets, its fifteen year civil war in recent memory and a risk of state breakdown which could create fresh battlefields for Isis/Da'esh, after what is described to me as a 'spike' in terrorist violence in June of last year. There is an overwhelming case for a substantial European investment in Lebanese schools and health facilities, in its barely functioning public water and electricity supplies. It is a humanitarian case to combat the deep penury of refugee families living on food rations of US$21.50 a month, against a local living wage of $400 said just to be able to survive. It is a development case to ease the pressures on Lebanese host communities, already suffering as previously buoyant economic growth has plunged below zero. Local people are worried that the conflict might spill over the border from Syria and that the social consensus which tolerates the presence of so many newcomers might be fractured, when international aid efforts have left more Syrian refugee children in school than Lebanese themselves. It is a security case, to sustain the stability of Lebanon and cut-off a future source of terrorist threat. Sectarianism within Lebanese society reflects divisions within the region as a whole. Overcoming the political stalemate between the different factions in the country, is a microcosm for working towards resolution of conflicts right across the Middle East and North Africa. Ironically, it is this very weakness of the state which means it has less to 'offer' to Europe in return, although the very idea it should do so leaves a sickening taste. But surely if the European Union is prepared to offer a 'grand bargain' of 'cash for cooperation' over refugees across Syria's border with Turkey, why not with far more precarious Lebanon too? The immediate barrier comes from Beirut rather than Brussels as, whilst Turkey can offer to 'control' the flow, Lebanon rejects any moves which could lead towards long-term integration locally of the refugees. Lebanese political and public opinion does so partly because of the 'phobia' created by the Palestinian refugees who arrived temporarily only to still be present in the country 70 years later; and partly to avoid distorting the country's highly delicate sectarian balance between Shia, Sunni and Christians, by threatening an injection from the largely Sunni refugee cohort arriving from Syria. Let me be clear, Britain and the rest of Europe should accept greater refugee numbers. The Middle East office of Amnesty International based in Beirut sets a target of 400,000 against the 160,000 currently agreed in Brussels. The UN's refugee agency in Lebanon backed up by European officials says there will be a huge psychological shift if the numbers in Lebanon can be reduced below the one million mark, and that flexible solutions including humanitarian visas, scholarships and other temporary as well as permanent resettlement programmes, can go a long way towards reaching that target. Europe's “offer” to Lebanon shouldn't just be about money and numbers, but - copying from the demand of Palestinians - advocacy for the “right of return”: giving explicit support that Syrian refugees will be enabled to go back when a genuine peace is restored. Indeed the educated, middle class doctors, engineers and other professionals who have most had the means to pay the people smugglers to escape the war, are actually the people most needed to stay near to the country, and to be ready to return to enable post-conflict reconstruction. The error in the failure to plan for rebuilding after the Iraq war, should now weigh heavily on politicians in relation to Syria. But Lebanon can “offer” something in return. Already, despite what appeared to be an implacable anti-refugee rhetoric, the country has been painstakingly persuaded to open up its education system to the Syrian refugees. Next, it is necessary to win the argument that the refugees must be allowed to work, ending reliance on the utterly inadequate handouts and confronting local fears that it will root them in the society. My discussions with the country's Ministry of Social Affairs suggest it may be possible. First, the rejection of refugee rights leaves those affected holding the status of Syrian “visitors”, theoretically fully able to work, even if the current system of work permits has hitherto been all but-ignored. Second, EU investment in the construction and agricultural sectors would de facto guarantee jobs for Syrians, because typically these jobs have been refused by Lebanese and taken by Syrian informal workers in any case. With education and livelihoods, Syrian refugees would have reason to stay. Is this all a messy compromise? Yes. Is it a morally dubious transaction? Certainly. But the alternative is escalating humanitarian disaster amongst Lebanon's refugee population, a dangerous cocktail of potential radicalisation amongst its youth and a breakdown of the structures which can control it, and no respite against the forces which ultimately drive the refugees to risk their lives on the Mediterranean and for survivors to batter down the door to Europe. Does Europe have the diplomatic skill, the cultural sensitivity and the political will to achieve this solution? I don't know. Talk of a new EU investment package has to be seen in the light of a continuing shortfall, which sees the UN's donor target for just the short-term humanitarian assistance needed still less than half met. Nevertheless, I have declined to write one more article simply cataloguing the shocking human suffering of the refugee crisis, in favour of one which makes a real effort to suggest some concrete solutions in which it might be tackled. A greater commitment to resettlement, aid to promote sustainable solutions within the region, a firm commitment to the return of refugees in planning for post-conflict reconstruction, are all essential to complement the EU's necessary diplomatic efforts to secure an end to Syria's civil war. One final note: I was told by a representative on the international 'core group' for Syrian refugee resettlement in Lebanon that the British plan to accommodate refugees explicitly excludes welcoming mothers and children whose fathers are left in Syria. Of course these divided families mean there will be later problems of reunification for our immigration system. But I am also told that these are the most vulnerable families who are precisely those who are most susceptible to putting themselves in jeopardy at sea. Yet again this is a political safety first policy for David Cameron which is about defending his position against his Tory Eurosceptic backbenchers rather than securing genuine human safety for people whose lives are at risk. Europe may not have responded well to the refugee crisis but the British Government's failure to make any commitment to a collective response is both morally reprehensible and contrary to humanitarian values. Whether it is Britain alone or the whole of the European Union, we should be tired of hearing politicians calling for "actions not words" then failing to define what those actions might be. This is my own attempt to do so. More Related articles Yes, it does matter that there are just two women on Britain's new passports An escalator deep under Kyiv has the power to change the rider’s existence What surveillance powers would the state have under the Investigatory Powers Bill?
