CapitalStackers has blasted the government’s crackdown on ground rents for not being retrospective.
The peer-to-peer property lending platform said that the Leasehold Reform (Ground Rent) Act, which comes into force at the end of this month, still leaves owners of leasehold flats as “fair game to be mugged for service charges and other fees”.
“Back in December 2020, we highlighted the highly immoral practice of housebuilders selling to new homeowners, but retaining the freeholds and selling them on to third parties who then charged a (seemingly innocuous) ground rent that doubled every 10 years, building up over the years to terrifying amounts,” CapitalStackers said in a blog post on its website.
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“At the time, we made it clear that while CapitalStackers is 100 per cent pro-developer, we wanted no part of this pernicious practice, and would not lend to any developer factoring this into their business plans.”
CapitalStackers noted that the updated rules mean an end to ground rents going forward. However, it criticised the act for not being retrospective, meaning that “it does not prevent landlords holding current freeholds from continuing to fleece their lessees”.
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“The government suggests that this is addressed by their wider leasehold reform scheme (of which the act is only one part) and have promised a second bill to take care of existing ground rents – but given that no date has been set for this and an amendment to the current bill which would have taken care of them was heavily defeated, this looks like an empty promise,” CapitalStackers said.
The ground rent issue is deterring banks and building societies from lending on these homes, according to the P2P firm, leaving many unsaleable.
CapitalStackers has said that this amounts to 4.6 million leasehold dwellings, or 19 per cent of English housing stock, and is causing a big blockage in the housing market that could impact the wider economy.
“This bill is a huge let-down for those who’d pinned their hopes and their futures on it,” the firm said.
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