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Housing minister promises to look at legal loophole in leasehold law

Housing minister Alok Sharma has vowed to look at a loophole in the Housing Act that exempts charities from having to sell or extend leases.

Sharma said this issue would be looked at as part of the now-closed consultation on leasehold reform, which he said he would like to see the Government respond to by the end of the year.

His comments came as Chi Onwurah, Labour MP for Newcastle on Tyne Central, led a Parliamentary debate raising issues her constituents were having with selling their homes due to their freeholder, the Mary Magdalene and Holy Jesus Trust, not letting them extend their leases.

Giving an example of one constituent looking to move, she said: “They cannot downsize because they cannot sell their property. Their lease has 70 years remaining and no mortgage company will advance a loan until the lease is extended. They cannot extend their lease because the charity who owns the freehold, the St Mary Magdalene and Holy Jesus Trust, refuses to do so.

“The trust was formed for the benefit of the freemen of Newcastle and their wives and children, and is now a considerable property owner in Newcastle. It owns the freehold of the St Thomas area of Newcastle as well as numerous properties in this and other areas of the city.”

Mary Magdalene and Holy Jesus Trust is a registered charitable organisation, and the Housing Act gives charities an exemption from having to sell or extend leases, so they are not doing anything illegal.

But Onwurah says this is unfair for home owners in the area who are unable to sell due to such little time being left on the lease.

Sharma said he would look at the concerns and said one of his officials has already spoken to a trustee of the charity who has outlined that they may well be willing to sell the property, extend the lease or carry out the enfranchisement.

He said the issue underlined the need for transparency in the leasehold market.

Sharma said: “We will look at the responses (to the consultation) and also consider issues on the disposal of charitable leasehold homes. This will need to show fairness to the needs both of the freeholder and the leaseholder, and also strike a balance with the needs of charities to remain on a sustainable footing to continue their good work.

“We have received over 6,000 responses, many of them extremely detailed. My officials are currently analysing those responses.

“I would like, before the end of the year, to announce the Government’s response to the consultation and propose reforms to be taken forward.”

Sue Pearson, chair of the St Mary Magdalene and Holy Jesus Trust, said: “This is a very difficult situation for those affected and we completely understand why Chi Onwurah has raised this matter in the House of Commons. This is a very complicated legal situation on which the Trust has taken legal advice. The Charity Commission is aware of the situation.

“We have explained all the details to Chi Onwurah and the Department for Communities and Local Government. The Trust would welcome any new suggestions about ways that the situation for tenants on the St Thomas estate can be addressed.”

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