UK’s “Ground Rent Scandal” is Wrecking Homeowners

The Global Rentier Economy is now on steroids.  

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Imagine buying a house with a 30-year mortgage only to discover months later that you have to pay rent on the ground upon which it is built. That rent can go up just about as high and as fast as the real owner wants it to. Plus, if you want to make any structural changes to the building you’ve bought but don’t own, you must first seek permission from the owner; if he or she concurs, you then must pay a hefty fee.

Absurd as this arrangement may sound, it is surprisingly common in the United Kingdom today. Banished from most advanced economies, including those with English common law like Australia, North America, or even Scotland, this archaic leasehold arrangement has in recent years wiped out the equity of thousands of people who mistakenly thought they were buying their own home.

When a house is purchased as a leasehold, the buyer, knowingly or not, is really no more than a tenant, albeit one with a tenancy agreement that typically lasts for up to a century. The freehold — the building as well as the land the property occupies — belongs to somebody else, usually the builder that sold the property, or an investment firm.

Leaseholds have been around in the UK for centuries and are commonly used for apartment buildings, where there’s some semblance of common land and building use. It didn’t used to be much of a problem as these annual payments leaseholders have to make to a freeholder were tiny. Sometimes they weren’t even worth collecting.

But in recent years, the terms of the leases have become increasingly onerous, with higher initial rents that then double every 10 to 20 years over the duration of the lease. Clauses like this are having a devastating effect on the equity of new home owners, who within days, weeks or months of buying their property realize they have virtually no chance of ever selling it on. After all, who wants to buy a property that you’ll never really own and on which you’ll have to pay a crippling rent?

This is happening not just with apartments but also new-build houses. In 1996 leaseholds accounted for just 6% of new builds; now they represent 16%. All too often, the new “owners” are not informed by the builder or their solicitor that they will soon be contractually bound to pay annual rents, often well into four figures. The Guardian recently reported on a home built by Taylor Wimpey for which a buyer paid £101,000 in 2010 but which is now unsalable, as ground rents are set to soar to £8,000 per year.

But the builder said it did not own the freehold.

This is a crucial part of the problem. Around 4 million — or 21% — of privately owned properties in England are leaseholds, and a growing number of the freeholds on those properties are owned by global investors, often domiciled in tax havens closely connected to the City of London such as the Cayman Islands or Jersey.

“Two hundred and sixty billion pounds worth of residential and commercial UK property is owned offshore where the ultimate beneficial ownership is hidden,” says Sebastian O’ Kelly, director of the Leasehold Knowledge Partnership. According to research by the satirical and current affairs news magazine Private Eye, the most popular location for registering a British property company offshore, with 22,155 registrations during a ten-year period, was the British Virgin Islands.

A couple of years ago, then British premier David Cameron, the son of a man who made his fortune operating a network of offshore investment funds that boasted of their ability to conceal funds from UK tax authorities, vowed that he would clean up the UK’s property market. This he would accomplish by exposing the use of “anonymous shell companies” – the sort of complex structures that were popularized by his globe-trotting predecessor Tony Blair – to buy up luxury properties, often in London.

Since then, precious little has happened. Now, the UK government is pledging that it will outlaw leaseholds on new-build houses while drastically restricting ground rents for apartments to a “peppercorn” value, thus wiping out their financial appeal for speculative buyers.

It will be a welcome change, though leasehold victims shouldn’t hold their breath. The last time a Tory government vowed to modernize and civilize the UK’s property leasing laws, way back in 1987, the result was the current legislation. More to the point, the current proposals will only affect future sales, according to Communities Secretary Sajid Javid. As such, those already trapped in a leasehold with no hope of escape will have to seek redress from the freeholder, whoever they are and wherever they be. By Don Quijones.

Oh the irony: EU capitals are trying to attract the very institutions that caused some of the worst financial scandals of the last ten years. Read…   Did the City of London Just Press the Panic Button on Brexit?

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  70 comments for “UK’s “Ground Rent Scandal” is Wrecking Homeowners

  1. Willy2 says:

    – This is simply one more reason why the real estate market in the UK will get hit even more.
    – And people are wondering why premier Theresa May and her Conservatives lost their majority in the june 2017 elections in the UK ?

  2. Willy2 says:

    – In fact these “investors” are killing the goose that lays the golden eggs.

    • Tom Welsh says:

      As Lenin apparently didn’t say (but should have), “The capitalists will sell us the rope with which to hang them”.

      This seems to reflect his views quite accurately, but it’s been pointed out that he was not given to witty turns of phrase. He wrote something to more or less the same effect, but took a whole paragraph of turgid prose to do so.

      • Jerry says:

        I was not born in the UK and it has taken me a long time to become knowledgeable about UK law. Most of these folks were born here and should have known better. I think Darwin’s Theory applies here rather anything that Stalin might have said.

        Stupid people do stupid things. UK housing will collapse by 50% in the coming years if folks do not see that because they are watching X Factor instead of following the markets…. what can you do. Survival ion life requires thinking, if folks choose not to think will they must suffer the consequences.

        Some folks here in the UK think they will get a pension LOL, private pension here in the UK are under water right now by about 600 to 800 billion so why aren’t they cashing out?

        Most people, the drones, the group thinkers still have faith in the system. They choose not to see, that our roads are falling apart, our A&E’s are closing down, you can not make an appointment to see a doctor without them calling you back to filter you, NHS dentist are an illusion, our justice system is dysfunctional and our politicians are crooks.

        This is the end of the western Empire, like all empires collapse eventually.

        • Frederick says:

          I’m cashing out Took SS early at 62 and buying silver with the money every month By the way my apt here in Warsaw is built on city owned land and I pay around 300 pounds equivalent in land tax annually

        • TC says:

          My house is freehold, my pension people wanted to know if I wanted my pension at 60 instead of 65( last year)…urm I said yes…I can see my doctor most mornings, if I phone at 8am and I have a good, socialist, NH dentist (he is still taking patients)…..the odd road here is a bit bumpy though and politicians are crooks but my A&E is pretty good and is only 300 yeards away….it’s tough up north….

  3. kitten lopez says:

    interesting, because i wonder if developers are doing something similar in SF with HOA fees on single family homes they demolish and turn into condo duplexes. there’s a difference between TIC (tenant in common) and CONDOs. i think the condo conversions here happen by lottery.

    point is, that a little single family shack here was turned into a duplex two condos where you pay HOA fees. that seems “odd” to me.

    • Wolf Richter says:

      The condo conversion tsunami a few years ago in SF didn’t involve tearing down the building. These were the typical older SF buildings with 2 or more apartments, built before June 1979. These buildings are rent controlled. So the value of that building is determined by the amount of revenue that can be obtained from it via rents. By converting the apartments to condos and renting them out as before, rent control no longer applies. Landlords could raise rents as they saw fit. This was designed to dodge rent control laws. My understanding is that the city cracked down on these conversions.

      However, if you’re building a new condo building (after tearing down whatever was there before), no problem.

      A lot of condos in SF are investor-owned and rented out.

      • kitten lopez says:

        thanks, Wolf.
        i’m just not understanding endless HOA fees on a DUPLEX. i thought you’d buy a duplex outright (like a freestanding house) and don’t understand paying HOA fees to a developer forever.

        it seemed clever like the renting land on a trailer in a trailer park vs. renting land underneath permanent UK homes. / i guess this all fits under things that confuse me like water rights (like when you cannot even collect rain water that falls on your roof of or pump from underground streams beneath the land you “own”).

        • Wolf Richter says:

          Yeah, owning a condo where you don’t control the HOA can be tricky and very expensive. There is normally a right to vote in a HOA. The right is apportioned based on the percentage of the building that your condo represents. If you own the smaller condo in a duplex (say, it represents 46% of the building), you pretty much do as the other owner wants you to.

          I’d never ever buy a condo like that.

          Even in larger buildings, the HOA can be a very political animal with plenty of corruption. I used to own a condo in a tower in flyover country and went to the HOA association meetings. There were people who owned 25 condos and rented them out. My condo (which was two condos combined into one) represented 1% of the total. Even if I got 20 individual resident-owners lined up, we were helpless against two or three big investors whose sole interest was in maximizing the rents they could charge.

        • Jerry says:

          UK here; what is HOA fees please?

        • Wolf Richter says:

          HOA = “Home Owner Association” — the administrative body of a building of condos (“condominium” apartments) that are each owned by individuals, and where the common areas of the building, including the building itself and the property it sits on, are owned by all condo owners. The HOA is like a mini-government with elections, a budget, rules, corruption, taxes (hefty HOA fees), and all.

        • mean chicken says:

          Whomever is paying HOA fees is beneficiary of the HOA rules and carries some weight in their enforcement. Conversely, try putting a car up on cement blocks in the yard and see if the HOA doesn’t send you a nasty-gram threatening a fine.

          If they’re not “policing” the neighborhood according to the HOA rules and regulations, they’re not doing their job that you’re paying them to perform.

          This, in many cases, also involves grounds keeping, manicuring the foliage and such, and possibly maintaining a neighborhood park or pool.

          As an owner, you should’ve received a copy of the HOA rules and regs if you’re paying them directly otherwise your landlord pays and directs you/his property accordingly.

        • Slynns says:

          The builder probably passes the HOA management to the new owners or to a hired company as they prefer – it’s not meant as a money-maker but as a way to sock-away funds every month for major repairs and paying monthly maintenance (landscaping, outdoor lighting, trash & sewer if joint, new paint, new roof). Every cost needs to be disclosed so you will see if most of the fee is paying someone to manage the dues. If you don’t have HOA (budget and plan) then you both have to kindly “agree” to expense every. little. thing. And pony up for major expenses if you choose not to build up a reserve – which might suit you both fine.

          That could make selling harder since people want to see paperwork of your expenses and projected expenses years out. More reserve adds to the value.

          But I’ve never looked at HOA for such a small community (2 units). Have seen it for tri-plexes. Large developments of houses sometimes have small fees meant just to keep the entry sign painted and lit and maybe a security patrol.

  4. Old Engineer says:

    Actually, it may not be practiced in the US now but I know of at least one development in (or near) St. Petersburg, Florida in the 1970’s where the houses were sold but the land was leased. Which was probably not a bad idea as the land was a sand island which was about 18 inches above sea level.

    • alex in san jose says:

      In Hawaii it’s “fee simple” (you own the house and the land) and “leasehold” where you own the house but the land is on a lease, which may have 99 years on it, or 15 years left, or whatever.

      Guess which kind of property the unwitting and hated “haole” (white person) is going to get steered toward?

      That being said, Hawaii’s not bad to retire to, and if all you’re gonna do is sit around watching “Pau Hana Years” (TV show for old people that’s boring as hell) and drink mai tais and do old people stuff and you only think you’re gonna be on this earth for another 15 years, leasehold makes a lot of sense.

      But it’s really weird, looking at real estate there and seen the “FS” or “LH” on real estate signs. I mean, I didn’t think a thing about it as a kid or teen, but I now know it’s weird.

    • Mike G says:

      In Palm Springs I believe there are houses on Indian reservation land sold to the general public that are leasehold. If you look at a map the city is a weird checkerboard of Indian and private lands.

  5. JungleJim says:

    This is baffling. Did the purchasers of the houses not have an attorney ? Did they not do due diligence ? It’s axiomatic that the smaller the print, the more important it is to read it.

    • Maximus Minimus says:

      I do not know where you live, but where I live, people buy houses like oranges. There is a line, and whoever conducts due diligence is out. Probably that happened in these cases, due diligence be dammed. You can reason that the common folks are stupid, but you know who is ultimately responsible.

      • JungleJim says:

        I live in Clearwater Florida and given the amount of money involved in buying a house, you have to be very naive not to do due diligence. Color me old-fashioned, but I would much rather lose a purchase, than lose a couple of hundred thousand dollars. I would classify the land lease as a title defect.

    • robt says:

      Leaseholds are usually always identified as such, and if the buyer doesn’t notice that, the lawyer notices, but the usual big alert is that the property sells for significantly less than similar freehold properties.
      Maybe some people think a seller and their agent and any other buyers are stupid, and they’re getting a big bargain, but more likely it’s buyer’s regret.

  6. chris Hauser says:

    um, people buy a house and don’t know the land is a leasehold? really?

    does the lender mention it?

    cameron, blair, duke of westminster, what’s british slang for ay caramba?

    • kitten lopez says:

      they have similar small fees they CAN charge all tenants–not just rent control (i forget what they’re for but they’re not the occasional ones landlords can pass on to us from big improvements. i got hit with them from our former mgt company as occasionally they get a new employee with new ideas on how to harass tenants or generate additional fees, and they might accuse tenants of not paying rent years earlier [highly unlikely with all the fear of losing one’s place] but many WILL pay as it’s hard to prove when banks have long since consolidated and you can’t find a copy of a check from 3 years ago when your account has changed–even though i think there’s only a 2-year period they can go back and make claims…but many people don’t have TIME to find out and they panic and pay so it’s worth it to harass tenants and make sweeps), but the fees are “nominal” and balance out when the landlord’s supposed to give renters a tiny percentage of interest on the deposit they originally put on the apartment.

      HOWEVER, like with the UK land lease fees, if a landlord wants to start capturing those other fees because we don’t know about the deposit interest or other things, they start to bill us.

      corporations also started fee-ing people to death like a decade ago. the credit card companies realized people won’t call in and bother with the hassle of a refund if it’s $10 and under.

      • kitten lopez says:

        (and yes, i’ve had our current management company run that non-payment of rent scam on me FOUR times. i now ignore them because the first time i ended up panicked at the tenants union. they do it YEARS after the fact like they’re finally settling something up and it looks all official but i know the law now. and they hush when i call them out. i think enough people pay like it’s a form of extortion. but there are all sorts of things in the fine print NO ONE reads. there’s the law and there’s what’s in actual practice. so i can see people getting burned with leasing land they didn’t know about)

        • kitten lopez says:

          actually i just realized this is how some of the dirtier landlords must’ve bee harassing rent-controlled tenants to leave, because i remembered hearing some folks just leave when they see any eviction notice or they freak out and mess up like the tech guy did as he’d never FACED eviction (the guy wanted to airbnb it out).

          the first time my apt mgt co demanded partially unpaid back rent, it also came with a 5-day-or-quit notice with a demand for back unpaid rent, with late fees. the follow up attempts later threatened eviction without my paying. / but as a self employed person i keep things back 5 years and wrote off a portion of my apt since i write here so i had cancelled rent checks.

          i forgot about these tactics.

  7. Maximus Minimus says:

    I didn’t go unnoticed that whenever a property changes hands from a local owner to a global corporate overlord, the prices, fees, tickets go substantially up. There is a pattern to it. The property moves to the global financial machinery for additional fee extraction.

  8. michael says:

    How this any different than property taxes.

    • Dan Romig says:

      That’s a good question Michael. The property taxes on my Minneapolis home get a bit of a refund based upon my adjusted gross income. But even though, in theory, I own my land and home free and clear, if I do not pay the property tax, Hennepin County can take the deed from me.

      Of course, my property taxes help pay the saleries of the fine people on the Minneapolis Police Department.

      • gary says:

        Well, here in Canada (and other Crown jurisdictions), when you buy a house, it is still technically owned by the Crown. This is usually not a problem since you can do just about anything you want with the land (subject to zoning laws, etc.), you still have some mineral rights, etc etc. I guess in the U.S.A. you just replace Crown with Federal Government. Overall this system works. I really don’t understand those people who think they should have absolute lordship over the property they own. That would mean they could do ANYTHING they want on it, which is absurd on it’s face. About the only issue with this arrangement that I can think of is the level of taxation, but I hope you realize that we’re going to have to pay some tax if we want a functioning country.

        This U.K. thing adds a THIRD level to this arrangement (a parasite between the Crown and the owner).

        • mean chicken says:

          In the US, property taxes are typically paid to the county. I pay property taxes for my home and registered vehicles also any equipment I declare ownership of, such as a farm tractor.

          They find ways of disposing of every penny and more, thus when I attend the county meetings I always remind the supervisor he should consider spending my money as he would be spending his own.

        • robt says:

          They weren’t parasites – they provided the land and the house you bought/buy was/is cheaper. If people don’t like it, they can spend more and buy freehold. It worked for centuries but possibly some financial characters have got involved lately, bought up a bunch, lawyered up, and do what they do best.
          Historically it was just a nominal fee that couldn’t be raised without written agreement between the tenant and the landholder, and I believe those are still the rules. Arbitration is available if needed.
          In the UK when searching you specify whether you’re looking for leasehold or freehold.
          I personally have never and would never buy leasehold, simply because the possibility of price appreciation is poor.
          BTW, there’s lots of leasehold property in Canada (as well as everywhere in the world).

    • MD says:

      Well it’s ground rent, paid to a private landlord (literally).

      Monthly property taxes are also levied by the state in the form of council tax.

      It’s a rentier ripoff. Pay a million pounds for a house…and still not own the land it stands on.

      However, it’s always made perfectly clear that any sale is leasehold so it’s the buyer’s free choice.

      Madness IMO.

    • Frederick says:

      I can’t see any difference whatesoever We pay one way or the other Sometimes twice So far in Turkey there are no property taxes on my house or minimal amount Hopefully they don’t get any more bad habits from the US/UK We like it the way it is

  9. walter map says:

    “The Global Rentier Economy is now on steroids.”

    The global rentier class is determined to plunder the planet to it own extinction. They’re quite single-minded about that.

    • Cynic says:

      Yes, Walter, how true: but it’s like an extermination camp – they have many helpers and underlings, who believe that survival is possible. .

      Take your badge and play your role until eliminated.

      Communism also does not do very much better as regards environmental destruction.

      It’s the nature of the beast: Man. :)

  10. nick kelly says:

    An odd thing about the UK. I don’t know if its still the case but in the UK realtors (estate agents) can’t draw up a legal contract. They present their offer and acceptance to lawyers, who prepare the actual contract.
    So what kind of legal advice are you getting if the title search doesn’t reveal your non-ownership of the land?
    Sounds like cause for malpractice suits.

    • Cynic says:

      Indeed: incompetent lawyers abound in domestic conveyancing in the UK.

    • Steve says:

      Estate agents have zero qualifications other than a shiny suit, you can be one tomorrow if you wish.

      The owners were told it was a leasehold, but they would likely be first time buyers and not have a clue what that means. Also the legal fees would be paid by the home builder ***if you use their solicitor (lawyer)*** , so there is a huge conflict of interest to not dissuade the buyer out of a bad deal.

      Freehold houses are very very rare though.

    • Frederick says:

      Nick Of course they can’t The PTB want to make sure the lawyers get a nice piece of you along with all the other parasitic swamp creatures along the way Still waiting for the pitchforks to be unsheathed

    • Stevedcfc72 says:

      It is still the case Nick that the lawyers prepare the actual contract. This is what I don’t understand. The lawyers have no vested interest in shafting the client, the banks in this case haven’t either.

      As somebody else put I don’t know what happens elsewhere I wouldn’t let any estate agent draw up a legal contract, they are just glorified salesman.

      What normally slows the sale of a house in the UK is all the searches-checks done on the property, its thorough.

  11. Bobby Dale says:

    If the purchase involves a mortgage it seems the lien holder(bank) would make certain that the person granting the mortgage is aware of the leasehold as the bank will own the property shoud a default occur.

    • mean chicken says:

      Banker doesn’t care if the loan is destined to fail when he can simply sell the loan off to an government GSE(taxpayer) or other “unsuspecting” investor.

      The amazing thing is, how does a bank levered 90:1 for example, recover from even a small loss? Taxpayer buys the assets at full value outside any market, that’s how, and who do you think determines the value?

      In other terms, this is called privatizing gains and socializing losses, it’s become the new normal that hope and change didn’t address.

  12. Peeriewise says:

    Before the writer, and the comments go any further with this, may I mention that Scottish and English land law are not the same, the Treaty of Union 1707 having guaranteed Scotland its own legal system.

    Freehold, leasehold, and ground rents are an English concept, not Scottish.

    A similar but conceptually different system was practically and gradually dismantled and neutralised in Scotland through the 20th century.

    • Wolf Richter says:

      The writer (DQ) pointed out in the second paragraph that Scotland — along with the US and other countries — does not have this quirk in its property laws.

      • Lee says:


        The USA has one state in particular where land is commonly leased: Hawaii.

        I can’t remember the entire story in detail, but as much of the land in Hawaii was owned by the Royal Family, the land was put into trusts and rented out/leased to people when they died or when grants of land were made.

        When many condos and houses were built in Hawaii the land was not owned and subject to monthly lease rent payments.

        These leases were typically quite long and subject to revision based upon the market value of the land.

        The kicker is that some of these leases offer conversion at some point where the underlying land can be sold to the person leasing it.

        The problem with these leases is twofold:

        1. The market value of the land has soared over time thus increasing the land rent when revision comes. It also means that if there is a conversion you’ll have to stump up big bucks or end up missing out and end up paying increasing lease rent……………sometimes forever!!!

        2. Some buildings offer no conversion, but just increases in land rent based upon that underlying land value. in that case the lease rent for the land can soar to ridiculous levels wiping out hundreds of thousands of dollars of value. I’ve commented on such a property in Hawaii before and I’ll give details later.

        When I owned my place in Hawaii the condo was up for conversion and I really didn’t want to fork out more for the land than I paid for the unit. So I sold it.

        There is a condo called Kahala Beach Apartments.

        You can buy a beach front 2 bedroom unit for around US$82,000…………a real bargain except when you you find out that the fees will kill you.

        HOA monthly fee is US$1190 a month and the big whack comes from the lease rent on the land which is US$2206 a month.

        Condos in this building used to sell for around the US$1 million area.or around US$90,000 or so.

        No fee conversion is available. The lease runs out in 2027. Taxes will set up back around US$500 a month too.

        Other condos in Oahu also suffer from this problem. Another condo, Discovery Bay, is a hybrid where the association owns part of the land and the other part is still under lease and they are trying to buy the land.

        They even have ‘sandwich leases’ in lease rent buildings in the former “Sandwich Islands” if you are interested!!

        • Wolf Richter says:

          Lee, I’d be interested in publishing an article on this topic, based on your personal experience and some data that you might be able to collect. This could include some of the things you said here. If interested, contact me via the “Contact us” tab. Thanks.

        • hidflect says:

          My wife visited Hawaii with an interest in buying a property there but she was told that most of the land is owned by the Kamehameha clan who only lease out the land and charge huge monthly fees for leases that last only last a few decades. It seemed ridiculous when we worked out on paper how much you’d pay for what is basically a rental. The teaser is that the properties (mostly apartments) have a very low sale price.

      • VegasBob says:

        Lots of property in Palm Springs, CA and Rancho Mirage, CA is built on Indian-owned land subject to annual ground rents.

        As in Hawaii, a lot of the land leases are jacked up to outrageous levels when they are subject to renewal, effectively destroying the value of the structure built on the land.

        If owned that condo in Hawaii cost me $4,000 a month in HOA, land lease, and taxes, I think I’d give it away just to get out from under the intolerable monthly cost…

    • peeriewise says:

      With respect to the Editor, the term UK is in the heading, and the article states that the problem is common practice in the UK.

      I’m afraid the reference to Scotland in para.2 is also inaccurate. There is a common law system but it has its roots in Roman law unlike English common law.

      I think one of the Australian states may also have a Scots law basis.

      The United Kingdom encompasses more than one country and more than one distinct legal system.

      • Wolf Richter says:

        Good lordy, nitpicking titles. The “US” has common law. So we put “US” in the title of an article about US common law. Turns out Louisiana doesn’t have common law, it has the Code Napoleon. So should we list the 49 common-law states in the title to be accurate?

        • Brian Richards says:

          Wolf; I understand your concern about nitpicking, but I feel we all should attempt to communicate as clearly as possible. Communication is so sloppy amongst the American public, it’s no wonder that misunderstanding is rampant. Clarity of thought and clarity of communication are both traits to be honored. Excuse me for nitpicking : )

        • chip javert says:

          So should we list the 49 common-law states in the title to be accurate?

          Short answer: hell no.

          Readers (especially on this blog) are reasonably knowledgeable. If the information about the LA exception is material, it can easily be dealt with in the body of the article.

          Nitpicking is best left to lawyers. People demanding perfection would turn everything into dull legal documents. Question: how many of us have actually read the license agreement we all agreed to for our computer operating systems?

  13. MD says:

    As the UK – like the USA – is now basically a non-industrial country, its major business is economic rent extraction and economic ‘growth’ enabled via largely usurious lending practices.

    This is why the economy is ossifying, weighed down by the millstone around its neck of the financiers’ debt which is now onerous and inescapable.

    Lots of new cars…but 80+% of them are only rented, and will be handed back after 3 years.

    Still, at least we’ve got lots of coffee shops and cafes – funnily enough, every poverty-stricken country on planet Earth has lots of those, too. Just not many factories.

    Politicians refuse to see the link.

    If you’re American you’re probably thinking “that sounds familiar” – no coincidence in that, both countries have implemented the same disastrous neoliberal economic policies which have plundered the countries, removed their wealth-producing industrial base (much to the glee of the Chinese) and replaced it with casino finance.

    “Debt is wealth” we were told…only it isn’t. It’s just debt. And the piper will soon need to be paid.

    • mean chicken says:

      “Politicians refuse to see the link.”

      They’re the very best politicians that money can buy!

    • alex in san jose says:

      MD that’s an interesting view. And I can see, a correct one. It does not take a wealthy society to have coffee shops and cafe’s. Take a room, put some chairs in and tables, have a hot water kettle and tea bags and a variety of instant ramen and the good old Bunn coffee maker, and you’ve got a cafe that serves lunch. Add wifi and tons of people will hang out there and spend, even if they’re making $3 an hour they’ll still hang out there a bit.

      • Frederick says:

        True where else do you expect the homeless and semi homeless trust fund perverts to hang out in a climate controlled environment with semi sanitary toilet facilities

  14. walter map says:

    If you are somehow not yet confused about land ownership in Britain, read this and become totally confused:

    The great property swindle: why do so few people in Britain own so much of our land?

    The myth spun about Britain is that land is scarce. It is not – landowners are paid to keep it off the market.

    “The Crown is the ultimate owner of all land in England and Wales (including the Isles of Scilly): all other owners hold an estate in land. Although there is some land that the Crown has never granted away, most land is held of the Crown as freehold or leasehold.”

    . . . What this means is that, in relation to land in the UK, we are all tenants on the basis of the feudal superiority of the Crown, a superiority created in 1066 and founded on legal norms that were created to uphold that same feudal superiority.

    In the UK, the average “farmer” receives between £18,260 and £23,000 every year from the taxpayer for an average farm of 220-plus acres, whether or not he or she grows or herds anything

    . . . In practice, the agriculture subsidy appears instead to have become a permanent prop to an unprofitable business as well as a free handout to the rich . . . Among them are the current Duke of Buccleuch, with his 240,000 acres, the Duke of Northumberland, with 131,000 acres, the Duke of Westminster, with 129,000 acres, and the Prince of Wales, with 141,000 acres.

    Land swindles have long since been institutionalised. The present article represents simply new variations on the existing swindles, all designed to further enrich the wealthy at enormous expense to the general population.

  15. Sunny Veil says:

    Leaseholds have been around in the UK for centuries

    let me guess, started in London, Inc.?

    I guess that’s where the quite similar seeming U.S. Condo scam emanated from, just like those stunningly corrupted Big Four Accounting Firms which all directly trace back to London, Inc. Parentage.

  16. ChuckA says:

    I saw an episode of “Lakefront property Hunters” – or something like that, a couple looking for houses on the lake. About 3 weeks ago?

    One of the houses presented was for sale but you rented the lot it was on. This was in Alabama i think. Made no sense to me the way it was presented, think the couple was confused too! They passed on it.

  17. Realist says:

    Where I live we have people owning houses on rented land, but those people have been very aware about the land being rented. During the last decade or so the rents have tended to be imcreased. The case here is that investors are not allowed to play the game like in the UK, only the municipalities and the church is allowed to do it. That has kept the rents for the land low, but as municipalities have become cash strapped, the rents have increased as well as property taxes. The church has been the worst to increase rents for land plots and people living on those leases have raised a ruckus because of some strange reason :)

  18. ML says:

    Steve says “Freehold houses are very very rare though.” He must’ve meant leasehold, not freehold. Freehold houses are very common.

    In principle, there is nothing wrong with buying a leasehold house. What’s gone wrong is that some developers of new builds have been wording the ground rent clauses to enable the rent to double every 10 years or so such that it eventually becomes disproportionate. And the starting rent can be any amount that the developer wants, rather than a nominal amount for example £35 GBP or £10′, so the buyer does’t have any say in it.

    Also because the purchaser only owns the the right to use and occupy the property, not the built structure or the land as with residential flats which are normally leasehold, the freeholder’s consent is required for any alterations etc.

    The ‘uk’ government is pledging to ban leasehold houses but really all that is required is to outlaw draconian ground rent review clauses. That would do the trick without needing to change a perfectly acceptable system.

    As for originating in London, it was common for landowners to want to keep their freehold interests and why not. A freehold interest is irreplaceable. Go back in time and you’ll find ground rents of a peppercorn which was a valuable commodity. I have heard of ground rents that are not monetary: a white or red rose every year, a case of champagne.

    At least we don’t have rent charges anymore. This was a rent paid by freeholders!

  19. Kenny logins says:

    The UK housing market is broken.

    Cheap credit, dodgy lending (if you can pay you’re led to the cleaners), cronyism between gov and builders, trickle supply, massive profit margins on ‘built to maintain’ not ‘built to last’, out-dated planning mixed with nimbyism.

    They’re about to build a load of houses in east Leeds, a new by-pass built around east Leeds (since the old bypass has been turned into an urban road and a ‘new’ bypass is needed) and back filled.

    Who pays for this new road? The home builders.
    Who pays them? The home buyers. Who should pay? Gov via taxes.
    So now home buyers are even being asked to fork over for their infrastructure to go with their homes, with even more crony inefficiencies and costs.
    And the infrastructure they’ll get? The cheapest highest profit margin going.
    No no no. No train links from nearby routes.
    No link road into the nearby motorway.
    No nothing except a road feeding into already bursting radial spurs (one of which is on the ‘hot list’ for uk city pollution levels)

    To think leasehold can happen and chumps buy into it isn’t a surprise.
    It’s the exact reason everyone is into property.
    Gov won’t let it correct and throw money at it and protect it.
    It’s no wonder the industry can get away with anything it wants.

    For now.

  20. Mel says:

    Reading a lot of Victorian novels lately, from Project Gutenberg. Owning a house on rented land has not been bizarre at all. It’s been matter of course for centuries, and one of the topics the solicitor bores one with in the crises of the novel one is in. What is new is the drive to squeeze Masters-of-the-Universe sized rents out of the leasehold. Other commenters have pointed out, the Market will eventually show those landlords the truth, that debts that can’t be paid won’t be paid. Open question how much misery results before the landlords catch on.

  21. David says:

    We also have this arrangement in the USA, typically property owned by Native Americans and Native Hawaiian, but also some private individuals.

    What I’d say is…the deal is the deal in these situations (I have owned and sold them in the past). You are presented for a price on the “improvement” (the building or home), the monthly lease, the terms and length of the lease (might be 10 years left might be 60 years left); and the reality that the lease will need to renegotiated at some point in future (perhaps not in your lifetime). The plus side is that these homes tend to go for a fraction of the cost than if you owned the land, results in far less property tax paid each year (because you don’t won the land). Depending on “the deal” it can be a great deal. New owners must evaluate the overall deal and decide if it is right for them. As long as everything is upfront and available for evaluation, there is nothing wrong with this home ownership option.

  22. Quade says:

    So is this noted in the “sale” paperwork or not? If it’s noted and they didn’t bother to read the paperwork, I have a hard time being sympathetic. They’re essentially pre-paying for a long term rental and not buying a house at all.

    Unless I’m missing it, I don’t see anywhere in this story where it notes whether this is documented in the sale paperwork or not. If not, it’s pretty bad, if it is, who’s fault is is really?

  23. gadi says:

    Same thing is going in in Jerusalem. The Greek church gave a 200 year lease to an “Anonymous” group of investors that is planning to raise.

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