Harry Scoffin speaking to Pension PlayPen last year.
I have received a message from my friend Harry Scoffin, a young man who spoke at Pension PlayPen on rapacious behaviour of freeholders to leaseholders.
Here’s what young Harry has sent me
This has just dropped in the FT tonight:
We need your help again on this – it is appalling that the spurious lobby line about pension funds is being pumped into the Treasury and government again.
Your voice was absolutely critical in the last Parliament and we are so grateful for you speaking out and challenging the self-serving industry spin.
Had Sunak not called the election early we would have had a straight £250 cap. Not as good as peppercorn, but something that would have helped people get on with their lives and the flats market moving again.
I own a flat’s leasehold and can testify to having to pay a lot more money than I consider value for the services of the freehold. I do not know the freeholder but it could be a pension scheme and that’s the point – pensions are not just about VFM for members, they’re about VFM to all stakeholders. ESG includes a duty that extends to society and governance.
Pension Schemes should not be screwing leaseholders as freeholders and I don’t believe many are. If Schemes still are – they should be outed for disgraceful investment. But there is an easier way to stop such nonsense.
The country would be a better place (especially for leaseholders) if the Government capped freeholder fees at a peppercorn amount
Let me use the space of this blog to remind people of why this is a pension scandal
Currently freeholders can and do charge leaseholders a fee based on the value of the property, often this is an inflated value (as has been the case in our dispute).
The service from the freeholder is negligible, in most cases the leaseholder pays managing agents to do everything needed to keep the freeholder’s interests intact. The freeholder gets paid for doing nothing by people who are paying mortgages and management fees as well as stamp duty +++ when buying and selling.
The Conservatives agreed to reduce these freeholder fees to a peppercorn (yes I know what you’re thinking) and that was because freeholders do nothing. There is no VFM. In the end the Freeholder’s Trading Association managed to kick the scrappage into the long grass, there was a last minute attempt to cap the charge at £250 pa which would have been something but that got lost in the wash up of legislation at the end of Sunak’s Government.
Now it looks likely to be scrapped again, a Labour Government is after reviving the legislation and here is the Freeholders claiming it is us – pensioners – who need to be protected.
The Residential Freehold Association, which represents 10 members that own a total of about 1mn leasehold properties, said restricting ground rents
“would represent an unprecedented and unjustified interference in existing property rights, and would seriously damage investor confidence in the UK housing market and in the wider institutional investment sector which benefits from a stable legal framework”.
So whose right to rip off another group would that be. The right of pension funds it seems!
The RFA estimates that pension funds have invested more than £15bn in residential ground rents, which are seen as stable, long-term predictable income, and that the total value of investment in UK ground rents exceeds £30bn. If the government caps ground rents, it should pay investors £30bn in compensation, the RFA said. It also raised concerns about professional landlords leaving the market and leaving crucial building safety and maintenance works unfinished.
Bovine manure
This is total bovine manure. I went to a Mallowstreet investment seminar where this was rolled out some years ago and I made the point that the stable long-term predictable income is paid by leaseholders not because they get something for it , but so they don’t forfeit their leases when freeholders sue them. It’s a racket, successive Government know it and the PLSA (now Pension UK) have accepted that pensions who have bought freeholds are hanging on to something with a precarious value in terms of income. Ultimately, leaseholds may run out and freeholders sell new leaseholds but that is the only “value” of owning freeholds of leasehold properties.
There may be schemes like LGPS investing in social housing (new stuff doesn’t give the change to freeholders to charge nonsense fees) but I know of no pension funds investing in old properties with established leaseholds (which are the ones getting the rip-offs). I suspect that the RFA is just making pension fund reliance on this rip-off income up.
I hope that Pensions UK will make it clear that Pension Funds should not be relying on income and pensioners who know that their pension is being supported by nonsense about rights to this income should do what I am doing and say “enough”.
I did make a fuss in 2024 and I am going to make the same fuss in 2025. Let’s not forget that the actual reliance of pensioners on this income is tiny, likewise the impact on funding by sponsors of pension funds is tiny. Here’s the FT, as brought to my attention by Harry
But others have expressed doubts that there would be a significant impact on property investors.
Who might that be?
After the government concluded a consultation on the matter last year, Lee Rowley, former housing minister, said “no substantive evidence has been provided . . . that suggests that there is a systemic risk to the operation of pension funds or the financial markets”. In December 2023 the housing ministry said pension funds held less than 1 per cent of assets in residential property.
The £250 cap we were going to get last year would have been considerably lower than the amount I had to pay to Knight Frank who were collecting on behalf of an anonymous owner of the Freehold.
I do not want to pay more than a peppercorn for the peppercorn service I got from the Freeholder or Knight Frank last year. Neither do the other 28 leaseholders in my block. Let me give the last word to Harry Scoffin who is quoted in the FT today
Harry Scoffin, founder of campaign group Free Leaseholders, said Labour’s reforms should be based on peppercorn rates.
“Resale values have fallen and we now have a crisis with the biggest gap in house and flat prices for 30 years,”
“Lenders will not give mortgages against properties with escalating and high ground rents, compounding the crisis.”
“What is the point of the Labour party, with the second-biggest parliamentary majority in its 125-year history, if it cannot take on rent-seeking opportunists extorting people in their own homes under a system that dates back to serfdom?”
Still days of serfdom – a plowman dreams of better
Are the “pension funds” being talked about complaining the SIPPs of the previous freeholders? I have not heard of significant holdings of residential freeholds by collective pension funds, but I stand to be corrected.
I have heard from salespeople selling to trustees but I don’t know of trustees buying into let alone relying on this income to pay pensions. There may be a part of “wealth” where this is important and John Mather can comment on that. I don’t know who my freeholder is, it/she/he hides behind Knight Frank. I imagine how this works in general.
Railpen had been a significant owner of residential freeholds, but recently refocused its strategy away from this asset class due to issues like the UK cladding crisis.
Legal action has been taken against Railpen’s subsidiary, Grey GR, by leaseholders and the government for failing to fix fire safety issues on its properties, such as Vista Tower.
This has led to a significant write-down in the value of its affected assets and a change in investment strategy.
Last Friday brought a 167-page judgment from the High Court.
Over 558 paragraphs, two judges comprehensively dismissed the claims of freehold investors’ that the Leasehold and Freehold Reform Act 2024 (“LAFRA”) violates their human rights.
Specifically the freeholders challenge three measures within LAFRA.
First, the removal of their right to a 50% share of marriage value when a lease with 80 years or less is extended.
Second, the cap on the ground rent that can be taken into account in calculating the price payable for an extended lease.
Third, the elimination of the freeholders’ right to charge leaseholders the legal and professional fees for extending leases.
The freeholders making the challenge were the relatively acceptable face of ground rent grazing, although the term is relative as all seem to me to be involved in a racket.
The Grosvenor and Cadogan Estates formed one group of claimants. The ARC Time Freehold Income Fund, the Ground Rents Income Fund and PGIM formed another. There were separate claims from Long Harbour, Albanwise Wallace, John Lyon’s Charity and the Portal Trust.
Other large freeholders, such as Vincent Tchenguiz’s Consensus Business Group and James Tuttiett’s E&J Estates, were conspicuous by their absence.