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Crazy Lease System Means £39.3M A Year Ground Rent For A Flat In Coleshill

Birmingham public housing council flats
1960s Flats in Birmingham, at Woodcross

Flats in the Birmingham suburb of Coleshill dating from the 1960s are facing ground rents that double every 10 years, The Guardian reports.

Properties at Blythe Court, Coleshill, Birmingham, are in some cases facing ground rents that will eventually total more than £39M a year under the terms of their lease.

Flat 7 Blythe Court's ground rent is £8K a year, doubling every 10 years of its 149-year life. That leads to a ground rent of £32K in 20 years, and £39.3M a year by the last decade of the lease.

The freeholder is Mercia Investment Properties.

The claims come 24 hours after the U.K. Law Commission launched a consultation ahead of changes to the current form of leasehold tenure. The Law Commission envisages its replacement with commonhold.

"Commonhold was introduced in 2002 as a new way to own property. It allows a person to own a freehold ‘unit’ — like a flat within a building — and at the same time be a member of the company which manages the shared areas and buildings," the Commission said.

"Crucially, unlike leasehold, owners own their ‘unit’ outright, so their ownership won’t run out at a point in the future and they won’t have a landlord. Despite this advantage fewer than 20 commonhold developments have been created since the law came into force in 2004."

The move is in response to campaigns about the injustice of the ground rent system, particularly as it has affected people who thought they were the owners of newly built houses.

The government has already said it would respond. In December Communities Secretary Sajid Javid announced new measures to cut out unfair and abusive practices within the leasehold system, including a ban on leaseholds for almost all new build houses.

Related Topics: commonhold, leasehold, Law Commission