Experience shows that the longer sharp practices that rip off people or other businesses continue, the bigger the fall when the government intervenes.
The business sector is viewed negatively by much of the population. The real estate industry has at best an average reputation with the public. At the end of last month, the balloon went up on ‘rip-off’ residential ground rents, with the government halting ground rents on new houses and possibly capping them on flats.
It was good to see the British Property Federation support such a stanceand it should now lead from the front, because effective self-regulation is almost always better than clumsy government intervention, which often has unintended consequences.
The quick way to stop such rip-offs is for the new home warranty insurers such as the National House Building Council to refuse to warrant such home leaseholds and warrant only up to a certain nominal ground rent for flats.
Likewise, the Law Society should urge lawyers to refuse to act for such developers in these transactions. The RICS could also set guidance for mortgage valuers to refuse to value such new leasehold houses. This would end it. Sadly, I am not holding my breath that any of these bodies will show this clear leadership.
House prices have slipped in recent months
Clearly, issues that have occurred under such leases in the past could be remedied by simple measures such as capping existing ground rents or stopping future reviews.
Ground rent specialists would whinge, but frankly they must have known their trade was immoral and unsustainable. Their charging of often exorbitant fees for needless consents borders on being feudal. The government will probably have to regulate here.
Self-regulation would surely impress government and make it more willing to trust well-supervised industries.
Government, local authorities and the public are suspicious of the property industry over reported hoarding of approved housing sites, dumbing down planning conditions and playing games with viability testing. Gaining the trust of government may lead to simpler and cheaper planning and development.
Charging of fees for needless consents borders on being feudal
Elsewhere, how long can the commercial property landlord insurance scam be sustainable? A fair fee to place insurance is fine, but we all know that some of the largest players in the industry are ripping off occupier customers. Inflated insurance premiums abound that the occupier is legally unable to do anything about owing to their lease restrictions. The insurance companies are complicit partners in this.
More sharp practice exists among property lawyers, who make life overly complicated to generate higher fees. One example is the requirement for legal opinions to buy and sell property, which is a waste of time and money.
There is also the sharp practice around the technicalities of serving break notices on leases.
Customers have to waste time and money seeking advice on the exact wording of a break notice, which their lawyer then sends by registered delivery to three or four different addresses and companies to ensure it is properly served.
Landlords often then waste more time and money seeing if it is properly worded, or whether they can find a way to prevent it. Surely a simple, clear email, copied to the lawyers or sent by registered post to prove delivery, would suffice?
Let us be proactive. If we do not change our ways and eradicate sharp practice, the government will end up changing things for us.