Urgent reform to leasehold needed

In a report published today, 19 March 2019, the Housing, Communities and Local Government Committee has called for wide ranging reforms to the leasehold system.

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The Committee established an inquiry to build on the work being carried out by the Law Commission and to find out whether the Government’s proposed leasehold reforms went far enough.

In October 2018, the Government launched a consultation proposing to cap ground rents on new-build leasehold properties at £10 per year, require most new-build houses be sold as freehold, and make it easier for tenants’ associations to be formally recognised by freeholders.

Campaigning

NAEA Propertymark provided written evidence to the Committee in September 2018, arguing that the Government’s programme of work on residential leasehold reform must go further to ensure developers no longer build on land when they do not own the freehold and put measures in place to restrict charges.

We also outlined that right of first refusal should be extended to houses and the procedure for right to manage must be simplified. Furthermore, we said the Government must ensure developers compensate leaseholders to remedy onerous clauses and purchasers of new build homes have access to an ombudsman scheme.

Looking to the future we believe that regulation of the property sector and better use of technology through a digital property logbook can empower new and existing leaseholders.

Committee conclusions

The Committee has concluded in its Report that it would be legally possible for the Government to introduce legislation to remove onerous ground rents in existing leases. Other measures include:

  • Existing ground rents should be limited to 0.1% of the present value of a property, up to a maximum of £250 per year.
  • The Government should revert to its original plan and require ground rents on newly-established leases to be set at a peppercorn (i.e. zero financial value).
  • The Competition and Markets Authority should investigate mis-selling in the leasehold sector and make recommendations for appropriate compensation.
  • The Government needs to ensure that commonhold becomes the primary model of ownership of flats in England and Wales.
  • The Government should require the use of a standardised key features document, to be provided at the start of the sales process by a developer or estate agent.

Best practice

NAEA Propertymark has recently produced a new Understand Leasehold guide for members and delivers a training course to help agents get the latest comprehensive knowledge they need to successfully market and sell leasehold properties.

NAEA Propertymark is also leading the Transaction Reform Group in its quest to speed up the house buying and selling process. The group brings together agents, conveyancers, Land Registry and other interest partners. A key objective is to merge the TA6 form with the Property Information Questionnaire to ensure that consumers are both sale and market ready.