Pensioner, 90, hit with £17,000 ground rent bill – as next government faces call to abolish ‘medieval leasehold system’

A 90-year-old pensioner who has paid off his mortgage is having “sleepless nights” after being hit with a “feudal” £17,000 bill for ground rent.

Derek Taylor is one of five leaseholders at Elgin House, North Herts, whose annual ground rent has risen from £25 to £2,350 – an increase of 9,000%.

The rise has been backdated to 2018, meaning he now owes £17,169 in one lump sum and is facing legal action if he does not pay.

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The case has renewed calls for the next government to abolish England’s centuries-old leasehold system, which campaigners say is “feudal” and “exploitative”.

A ground rent is a charge leaseholders have to pay so they can have a home on land they do not own and does not require a service in return.

The Tories promised to effectively abolish these charges in their 2019 manifesto, but the long-awaited legislation aimed at doing this now hangs in the balance following Rishi Sunak’s decision to hold a snap general election.

Read More: ‘Buying a flat ruined my life’: Leaseholders plead for tougher legislation

Derek, who has lived in the property for 50 years and paid off his mortgage, told Sky News: “We were asked to send £17,000 plus pounds and about a fortnight later we got a letter saying this amount is outstanding and if it’s not paid in five days, we have no course but to take you to court.

“That caused a lot of upset because who can simply pay that amount of money?

“The letter upset me because it was very threatening. You wake up in the night and can’t get to sleep again because it’s on your mind.”

The letter was sent to Derek by solicitors Salter Rex on behalf of the freeholder Quadron. They did not respond to a request for comment.

‘Let down by government’

It said £17,169 is outstanding on his account and if he does not pay “we will have no alternative but to commence legal proceedings”. It added that a £120 administration fee will be charged on top of that if no money is paid within five days.

The ground rent increase is allowed under the terms of Derek’s lease, drawn up in the 1960s, which said the fee could be reviewed in March 2018 and every 50 years after in line with the annual value of the land.

Derek and his neighbours, who were not aware of the clause, took the case to arbitration but it was ruled that the rise was allowed and the lease agreement “includes no requirement for the level of rent to be “reasonable”.

Derek, a former print worker, said: “It’s simply because they can. Legally that may be so but whatever way you look at it we can’t see that this is fair.

“We feel let down (by the government). This has been going on so long, it should have been sorted out a long time ago and when this bill does eventually get passed we don’t know if it will apply to our situation at all.”

Derek is due to meet his local MP Bim Afolami, who is also the economic minister, next week to discuss the issue.

In a newsletter to constituents seen by Sky News, Mr Afolami said he was aware of the situation and the government is “committed to removing these terrible practices”.

‘Leaseholders in limbo’

At the last election in 2019, the Tories promised to reduce ground rent to a zero “peppercorn” rate.

But the Leasehold and Freehold Reform Bill, which was meant to be the mechanism for doing this, was only introduced to the House of Commons in November last year and is yet to be given Royal Assent.

The policy will be considered in the House of Lords later as part of the “wash-up” period, when the final bills that will become law are rushed through parliament before it is dissolved for an election.

The National Leasehold Campaign (NLC) has welcomed this news, amid fears the bill would be killed, but said the “devil is in the detail” as it is not clear if a cap on ground rents will be included in the final draft of the legislation.

This was due to be added to the bill as an amendment, but there have been reports for months that the Treasury wants to block the policy because it is worried about spooking insurers and pension funds that have amassed vast freehold portfolios.

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Katie Kendrick, co-founder of the NLC told Sky News: “Leaseholders remain in a state of ‘Leasehold Limbo’ wondering if they will be helped by this bill.

“It remains to be seen how far this bill will go but rest assured that there will still be some way to go to achieve our goal of abolishing Leasehold and a move to Commonhold.

“Abolishing the medieval leasehold system must be in all manifestos and any incoming government must prioritise this.”

Where do the parties stand on leasehold reform?

The issue could be a dividing line in the general election campaign, amid a wider housing crisis which at its heart is a problem of insufficient supply and spiralling affordability.

Labour has said they will abolish leasehold, but recently pushed back the timeline for doing so, blaming the Tories for watering down their own proposals.

Housing Secretary Michael Gove initially said he wanted to abolish the system, calling it “feudal”, but his bill only went as far as to ban leasehold on the sale of new houses.

Houses make up a small portion of around five million leasehold properties across England, most of which are flats.

Other provisions of the legislation include making it cheaper and easier for people to extend their leases, buy the freehold and gain the right to manage their buildings.

But whatever measures are ultimately enacted, for some leaseholders it will be too little too late.

Freeholders ‘cashing in’

Derek’s neighbour David Pickett ended up borrowing £54,000 from family members to change the terms of his lease so that moving forward, his ground rent will be £0.

The rise in ground rent risked leaving him trapped as it significantly devalued the property he poured his savings into, putting him at risk of negative equity and reducing his chances of selling it.

The payment included £15,000 in backdated ground rent and a £34,000 premium – a fee David says is around seven times higher than three other neighbours in identical properties who renegotiated their lease terms in 2016. They have a fixed ground rent of £100 a year and paid a premium of between £4,000 to £5,000.

However, for communications worker David that was not an option.

“Everything is done in mathematical formulas that are hard to understand, the language they use is so cold,” he said.

The 31-year-old said delays to leasehold reforms have allowed freeholders to “cash in” on people like him and Derek.

“Part of the reason we delayed to arbitration and tried to push this as far back as possible is because we thought these reforms were coming soon and when we were getting legal advice they were talking about this bill so we always had this hope.

“Now it just feels like that flame has been extinguished.

“It feels like there is nowhere to turn for help and anyone that can help wants £200 an hour.”