MPs warn of 'fleecehold' on new housing estates

A group of MPs are calling on Housing Secretary Michael Gove to ban new so-called "fleecehold" estates in the Leasehold Bill.

The group is warning about leaseholders being being stung with punishing bills for private maintenance contracts.

These residents are locked into contracts where public amenities, such as roads, are managed by an outside company rather than the local council.

Up to four million people are now thought to be living on such estates.

The letter from 46 Tories, including two former housing ministers, calls for the ban on such arrangements in the future to be included in the bill, which is working its way through Parliament and will be debated in the Lords on Wednesday.

The Competition and Markets Authority (CMA) has also recommended ending the private estates model, which has been used by for 40% of all new builds across Britain in the last five years, and recommending the mandatory adoption of public amenities on new housing estates by local councils.

A leasehold is where home owners don't own the land their property is built on but instead lease it from a landlord for as many as 999 years and are sometimes subject to ground rent and other bills.

Mr Gove has labelled leaseholds "an outdated feudal system that needs to go", and the bill proposes reform to leasehold for new houses.

In addition, it suggests all ground rents reduced to a peppercorn amount, which was intended to encourage landlords to sell up to leaseholders.

But there has been fierce opposition to reform of leaseholds, which still affect one-in-five homes in the UK, including from the Treasury, which claims altering contracts could be deeply damaging to investment.

Backing abolition, Katie Hendrick, the founder of National Leasehold Campaign called the current system "rotten to the core".

"Remember we are the only countries left, England and Wales, with this feudal, archaic system of leasehold," she told BBC Radio 4's Today programme. "Why do we still have it? Because it makes investors, it makes freeholders, so much money."

Ms Hendrick said a nominal "peppercorn" ground rent had historically been the norm but escalating fees were increasingly being introduced.

"It's only been since the 2000s, really that investors and freeholders have decided to create this asset out of ground rent for no other reason than to create a second asset on a property."

But Melanie Leech of the British Property Federation agreed there were "clearly problems" with property management, which she claimed were being tackled by responsible landlords.

However, she claimed ground rent was a different problem as they were treated as long-term investments by companies including pension funds.

"What's incredibly damaging to investment into the UK is the idea of taking retrospective legislation that would alter contracts that were entered into in good faith," she said.

"The idea the government would be taking action that disincentivises that investment, that makes the UK less attractive to invest in, is something we find really hard to believe in."