Leasehold Properties

Branded as 'the PPI of the house building industry', awareness surrounding the abuse of the leasehold system in newly built homes has gained a huge amount of momentum over the last few years. In March 2017 news of the leasehold trap broke after thousands of homeowners came forward, calling for compensation and asking for government involvement. Following months of pressure from leaseholders, MPs, and media outlets such as the BBC and The Guardian, in July 2017 the Government vowed to put an end to poor leasehold practices by promising to ban the sale of new-build leasehold houses (although this is yet to be enshrined into UK law).

During this time NAEA Propertymark has worked closely with Leasehold Solutions, the National Leasehold Campaign and Leasehold Valuers, to raise awareness of the scandal, and to bring the latest leasehold advice to agents and consumers alike. And now, as part of our campaign, we have surveyed more than 1,000 leaseholders to explore the extent of the scandal which has left thousands of Brits facing escalating ground rent, extortionate fees for making cosmetic alternations, and unable to sell their homes.

Since its release in September 2018, our research has received coverage with many major news providers and has been quoted in Parliament during debates. Our research found that 62 per cent of respondents felt they were mis-sold their leasehold and 93 per cent wouldn’t purchase another leasehold property. In May 2019, the Competition and Markets Authority (CMA) announced it would investigate whether leasehold properties have been mis-sold.

On 28 March 2019, 45 freeholders and developers signed a public pledge to “crack down on toxic leasehold deals.” This included a pledge to offer existing leaseholders ground rents linked to the Retail Price Index (RPI) and for freeholders to inform leaseholders in advance of any change to freehold ownership. Read more…

WHAT ARE WE CALLING FOR?

In the Government’s response to 'Tackling unfair practices in the leasehold market' it was indicated that big steps were going to be made to stop further abuse of the leasehold market in England. This included preventing the sale of new build leaseholds houses, removing the support of the Help to Buy Equity Loan in the purchase of leasehold houses, and ensuring that ground rent on all new long leases would be set at zero. In our submission to the Housing, Communities and Local Government Committee we outlined our position on what is being done and what needs to be done in reforming leasehold.

The Government must:

• Prevent the sale of new-build leasehold houses unless there is a legitimate reason, such as shared ownership with a staircasing lease.
• Prevent doubling of ground rents and ban ground rents where they increase above inflation for existing leaseholders.
• Set ground rents at zero on all newly established leases.
• Introduce legislation to exempt leaseholders from Ground 8 possessions claims.
• Make enfranchisement easier and simplify the process for lease extensions.

Further action:

• Legislate to ensure developers compensate consumers to remedy onerous clauses.
• Remove the requirement that leaseholders must own the lease on their house for two years before making a claim and ensure that developers do not build on land when they do not own the freehold to.
• Amend the Landlord and Tenant Act 1987 to extend the Right of First Refusal to houses and simplify Right to Manage.
• Introduce overarching statutory regulation of the property sector.
• Create a digital log-book for each property that is bought and sold.

Support existing leaseholders:

• Purchasers of new build homes should have access to an ombudsman scheme.
• All new house builders sign up to the Consumer Code for Home Builders.
• Where there is no managing agent, freeholders must sign up to a redress scheme.
• The government should implement a code of practice and disclosure document concerning event fees in specialist retirement developments as drafted by the Law Commission in March 2017.

Wales

Whilst the Welsh Government hasn’t adopted an outright ban on leasehold houses, improvements to the leasehold sector are being considered. Here's what the former Housing and Regeneration Minister for Wales, Rebecca Evans, had to say:

“We have seen widespread criticism of poor practice in the use of leasehold in Wales. We will not support practices which have a negative impact on homeowners, and I have already taken action to prevent the use of leasehold in new build houses in Wales.

“In terms of where we go next, these are complex issues, and I have asked a wide range of interested parties to advise me so that I can take well thought through and appropriate steps to address the wide and varied concerns that have been raised with me.”

NAEA Propertymark is a member of the Welsh Government’s Task and Finish Group set up to reform the leasehold sector. Commenting on the commencement of the group’s work, NAEA Propertymark Chief Executive, Mark Hayward, said:

“The leasehold sector is a big focus for us, and we’re pleased the Welsh Government is looking into it and taking action to help the country’s most vulnerable homeowners.”

In July 2019, the Task and Finish Group released its report that identified failings in the leasehold system and put forward recommendations on code of practice, accreditation of agents, options available to freehold homeowners and how to improve education, training and raising awareness.

View Report

The Report will now advise the Minister on leasehold reform including the reform of practices carried out by property agents. Further information will be provided in the Autumn 2019.

Helping you to further undertand leasehold properties

To keep estate agents up to date with the latest best practice around marketing and selling leasholds, we have put together a guidance document and a half day course for those that need a more in-depth overview.