A new lease of life: - CentreForum

A New Lease of LifeSchemes “may provide for all or any” of the above powers. 82 Asa result of these powers, two problems raised in this chapter canoccur even where individuals own the freehold – alterations toproperties and service charges. It is no longer possible to createnew schemes, which may explain why the problems confrontingexisting ones have not been addressed.First, some schemes simply regulate the external appearance ofproperties but others seek tighter control of properties’ interiors.This can mean that many freeholders wishing to alter the insideof their property must pay a premium to do so and the directorsof the scheme have the power to block a proposed developmentaltogether. There can be legitimate reasons for preserving thecharacter of an area, through controls on external development orthe use of a building. But it is hard to understand why a schemeshould have control over the interior of a property.Second, schemes can charge property owners ‘estate charges’ forgeneral work maintaining the area, such as railings, gardeningor drains, which are similar to service charges for leaseholders.Freeholders can ask an LVT to amend a scheme if they are unhappywith service charges set through variable estate charges orcalculated with a formula. But they cannot appeal against a specificunreasonable service charge at a tribunal, and are not protectedby the Section 20 regulations for consultation on significant worksor long contracts. This means that there is more potential forprofiteering through estate charges.ForfeitureLessees can currently lose all rights to their leasehold if they breachtheir contract, meaning that the full value of their flat may be lost forcomparatively minor sums, such as failure to pay ground rent. Thusa leaseholder could lose the full value of their property for failure topay their freeholder a sum which could be worth just 0.1 per centof its value. The OFT has stated, understandably, that this system is“disproportionate”. 83Forfeiture occurs only rarely, with its main power residing in thepotential that it could be used; its existence facilitates freeholder82 Leasehold Reform, Housing and Urban Development Act 1993, Chapter 5.83 Under leasehold tenure, the leaseholder may have the flat repossessed by thefreeholder without compensation for non-payment of service charges. The lackof monetary compensation is felt by many to be disproportionate . Office forFair Trading (OFT), ‘Property managers in Scotland – a market study: AnnexeG - International comparisons’, February 2009.47