Update on Leasehold Reform

In March 2019, the Housing, Communities and Local Government Committee published its 12th report following a six-month inquiry into leasehold reform. This was the result of studying more than 700 submissions in initial evidence, and further evidence received during the sessions with many leaseholders getting in touch with the Committee saying “Me too!”.

On 11 July 2019 Parliament discussed this report, and the Government’s response to it can be found here.

The following proposals on new leaseholds were agreed by the Government:

• A ban on sales of leaseholds on new houses;
• The limitation of ground rent to a peppercorn for new leases.

The Government wants to see standardised forms for services charges for all new and existing leaseholds, this is because the Committee received a lot of evidence of excessive amounts being charged for unexplained services.

Further, the Government agreed with the position that if the freehold is sold, the seller may not keep any service charges and permission fees that have accrued.

The Government also seems committed to banning freeholders from collecting from leaseholders the costs of going to a tribunal in cases where the freeholder loses.

The proposal that enfranchisement (the process of extending the lease or purchasing the share of the freehold) should become clearer and simpler was also supported, as was the proposed pricing system, which is based on multiplying the ground rents by the number of years of the extension (a standard fee for everybody based solely on the existing ground rent).

However, the recommendation to abolish onerous permission fees and ground rents for existing leaseholds was met with less enthusiasm by the Government. The Committee suggested that the Government may need to return to this issue again before the law is finally approved.

Reforms in relation to commonhold and existing leases were also unsupported by the Government, in particular:

• The legal position relating to commonhold and availability of mortgages (the Committee felt that it should become the primary form of tenure, whilst the Government preference was to have it as a “viable alternative”);
• Inducement for purchasers to use particular solicitors (the Government talked about better transparency, redress).

There were further calls on the Government to bring forward legislation to oblige lawyers to explain to prospective purchasers the full impact of purchasing a leasehold.

Now that the problems have been studied and highlighted by the Committee, the Government needs to take concrete steps to implement them and provide a radical shake up to get our housing market working again. This should be much sooner than “when parliamentary time allows”.

(Picture Credit) Frank 2012 / Shutterstock.com