Conveyancing Association responds to Government proposals on unfair leasehold practices

The Government’s open consultation on leasehold, entitled ‘Tackling unfair practices in the leasehold market’, has only a month to run and therefore it’s important that our industry provides a full and frank response to it.

It has been interesting to read a number of responses that have already been made public with a number clearly expressing concerns about what might replace leasehold, but also from a conveyancing perspective, the link between so-called ‘pet solicitors’ of housebuilders/developers and whether these relationships have meant a poor service for the client and a lack of transparency, with the accusation being that these firms are reliant on such referrals and don’t wish to rock the boat. 

This is obviously a serious accusation because it effectively suggests a dereliction of duty on the part of the firm – that the client is not the most important party in such a case, with the solicitor more concerned about securing future work rather than being, as duty bound, to act in the best interests of the client and report to them anything which would be considered in conflict with their interests at that time. 

As we all know, if they don’t achieve that then they are open to complaint from their customer, either via their own complaints process, the Legal Ombudsman or their regulator. In that sense, there is plenty of customer protection available if that firm is judged to have failed in their duty. It is of course difficult to provide a catch-all view on the behaviour and actions of solicitor firms in these cases – each will be very different however, given the chance of censure, it is a significant risk to be taking and I would hope that no firm has put themselves, or their client, in such a position. 

Our view with leasehold new-build, and the onerous terms that many new (and existing) leaseholders find themselves with, has always been clear. It would be a much better position if there were no such lease terms in the first place to be advised upon by all stakeholder parties – be they the conveyancer, estate agent, marketing office or valuer.

These onerous terms should simply not exist, particularly where there is the opportunity for abuse of the control which the developers have in this restricted market place. They should be offering leases that offer a balance of burden and benefit to the consumer that is fair; the balance has now shifted significantly in favour of the freeholder in these leases with such lease terms and we need to ensure that DCLG get this message through the responses to consultation and are not given the impression that they can solve the problem by relying on consumer protection that already exists. 

Our own response to the consultation – currently out to view by our members and stakeholders – will cover off this and a number of key issues. We want the Government to review Commonhold with a view to it replacing all leasehold with a working commonhold proposition, rather than a simple watering down of leasehold that some are already calling ‘fleecehold’. At the moment, with Commonhold, we are simply unsure whether it will work or not because developers don’t use it – the reason being there is no value retained for the developer from it, and that perhaps tells you why there are only 175 commonholds in England. We are currently conducting a survey of all those 175 commonholders and those that have responded say they’re happy with commonhold, and would choose it over leasehold.

If commonhold isn’t deemed an adequate solution and the Government persists with leasehold then it’s our view that we should require some substantial improvements. For example, leasehold should only be applicable where there are genuine shared amenities, the term of the lease should be 999 years with peppercorn ground rent, and all administration fees must be based on a reasonable fee tariff with access to a redress scheme if the lease administrator attempts to charge unreasonable fees or does not respond within five working days of a request.

These are common-sense proposals that solve many of the problems, and ensure that no stakeholder is put in a position where the client feels they are either finding out about onerous terms too late in the process, or they feel that they’ve been kept in the dark by those who were supposed to be acting in their best interests. 

It’s clear that we want to move away from leasehold being used purely as a motive to generate income, and produce ever-increasing profits for whoever might own the freehold. We also want to deliver clarity for all concerned – particularly the client – and we want to maintain the integrity of the service we provide so that no-one has to go through this situation again. There is a road to travel on this but, post-consultation, it’s our sincere hope that the destination is not too far away.

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