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Remove pitfalls for struggling leaseholders, damning report urges

Hapless leaseholders should be able to buy the freehold of their property faster and more cheaply, an independent report into the controversial properties has said.

The Law Commission paper urged that the complex system should be simplified.

Leaseholders were traditionally charged a peppercorn rent by their freeholder, sometimes as little as £10 a year, but in recent years these charges have risen significantly. Some leaseholders now pay thousands a year in “ground rent”, leading critics to call for an overhaul of the current system.

Some leaseholders are signed up to contracts which mean their ground rent doubles every 10 years. Other leasehold property owners have found it impossible to mortgage their property because of these high ground rents, leaving them unable to move.

Campaigners argue that houses have been sold on a leasehold basis purely as a money-making ruse for developers, who can sell on the freeholds to third parties for a profit.

To help make the market fairer, the Law Commission said a simple formula could be established to determine the cost of acquiring the freehold. This could be a multiple of the ground rent or a percentage of the property’s overall value.

Another option could be to maintain the current valuation-based system, albeit in a way that is more favourable to leaseholders.

The paper also suggested giving houses and flats the same legal definition for the freehold. At present, the process is different for the two types of property, and there have been legal issues when freeholders have argued that a flat is a house, or vice versa.

Other recommendations included the removal of the requirement for leaseholders to have held the lease for two years before they can buy the freehold. All leaseholders could also be given the right to extend a lease as often as they want, with terms of up to 250 years being considered.

The report raised the possibility of charging individual homeowners and property investors different sums for the purchase of a freehold.

The Leasehold Knowledge Partnership, a consumer charity representing leaseholders, gave the report a lukewarm reception. It said those who had already signed up to expensive leasehold contracts should be given the right to have more favourable terms.

Martin Boyd, of the charity, expressed concerns that the size of the consultation, which is 546 pages long and poses 135 questions, could be difficult for ordinary homeowners to respond to.

The Government estimates that there are more than 4.2 million leasehold properties in England, representing about 18pc of total housing stock. The Leasehold Knowledge Partnership argues that this figure is much higher, nearer 6.6 million.

Are you a leaseholder who has been faced with rising charges or unfair terms? Tell Telegraph Money your story by contacting adam.williams@telegraph.co.uk

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