Government announces leasehold reforms

The Government has now responded to the Housing, Communities and Local Government Committee’s leasehold inquiry and published its official response on 9th July.

Although the response has addressed a number of the Committee’s proposals, many of the suggestions have not been followed up, including more support for existing leaseholders and doesn’t respond to calls that had been made to prohibit the offering of financial incentives to persuade a buyers to use a particular solicitor – a factor which could explain why so many buyers have neither known nor understood that they were purchasing a leasehold property.

In their response the Government states that they have repeatedly made clear their “commitment to end exploitative and unfair leasehold arrangements” which, they say, have no place in a modern housing market and will embark on a significant reform programme, so home ownership is fairer and more transparent for both leasehold and freehold home owners as well as supporting the greater use of commonhold.

The reforms which the Government state they will bring forward are:

• ensuring that leasehold is only used for flatted developments in the future, by banning the granting of new leases on houses other than in exceptional circumstances;
• ensuring that consumers only pay for the services they receive, and that people’s homes are theirs to live in and enjoy, not designed as an income stream for third party investors, by restricting ground rents on newly established leases to a peppercorn (zero financial value);
• ensuring that there is a greater choice of tenure for consumers and support for leaseholders who want to buy their freehold or have greater control of the management of their property, by working with the Law Commission to look at ways to reinvigorate commonhold and improving the process for buying a freehold or extending a lease, or exercising the Right to Manage;
• ensuring that service charges and other charges are fair, information provided to home owners or prospective buyers is transparent and communicated effectively and property agents are up to scratch, by reviewing charges faced by both leaseholders and freeholders and professionalising and regulating property agents; and
• ensuring that there is a clear route to challenge or redress if things go wrong, by clamping down on unjustified legal costs for leaseholders, ensuring all landlord freeholders belong to a redress scheme and giving freeholders on private or mixed-use estates equivalent rights to leaseholders to challenge communal costs.
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The proposals have been given a partial welcome by the Law Society of England and Wales. Law Society president Simon Davis said that:

“It is encouraging to see government has recognised just how much easier it will be for consumers to make informed decisions if full information is provided at the very beginning of the home buying process.

“Conveyancing solicitors are usually involved at a much later stage, by which time clients may have already emotionally committed to the purchase – and may be less open to hearing advice about onerous conditions. This can make it much more difficult to advise. A time limit of 15 working days for developers and estate agents to provide the necessary information is therefore entirely appropriate and to be welcomed.

“It is particularly pleasing that alongside the government-proposed key features document for new build homes, there will also be some provision for the second-hand market. This will help consumers to make comparisons between properties they wish to view.

“We are keen to see a satisfactory resolution to all of the issues currently facing affected owners and prospective purchasers of leasehold properties. Although these proposals appear to be a step in the right direction, we look forward to seeing further details of how the proposed legislation will work in practice.”