Leasehold reform takes major step forward

There are often pivotal moments in any campaign and, at the House of Commons last month, we appear to have seen one. As many will know, the CA has been working on a campaign, with many stakeholders, towards reforming the leasehold process, and the debate between MPs on the 20th December was a huge step forward in that regard.

Although sparsely attended because it was the last Parliamentary session of the year, there were a number of highly-motivated MPs there as well as the Housing Minister, Gavin Barwell MP. In these days when ‘consensus’ can seem a dirty political word, it was highly encouraging to see so much agreement across both sides of the house, and there appeared to be a significant appetite for change.

The debate itself came off the back of the formation of the All Parliamentary Party Group on residential leasehold and commonhold this year, and there are clearly a growing number of MPs with constituents deeply affected by some of the practices that have made the headlines recently. Understandably, the Commons debate focused mainly on escalating ground rents, poor management of service charges and the inadequacy of dispute resolution.

For those who were unable to follow the debate, the above were the main topics under discussion by the MPs present, plus various other important points were raised such as:

  • Firstly, there was a large focus on the information provided to leaseholders themselves and their level of awareness about what they were signing up to. Many MPs cited case studies of constituents who argued they were not aware of the terms of their lease – in the CA’s recent White Paper and at our conference we discussed in depth the availability and transparency of such information upfront before a client commits and here there is clearly a need for leasehold detail to be presented in such a fashion. We’re busy drafting a leasehold animated video to sit alongside the current CA animations on the home buying process.
  • Secondly, unfortunately, there was criticism of conveyancers with the suggestion that firms were not providing sufficient advice and, especially for those firms that had been recommended by housing developers, there was a heavy suggestion of a lack of action/duty of care on their behalf. Again, the suggestion was that they were not acting in the best interests of their clients and there was a clear conflict of interest for those recommended firms. On this point it’s absolutely clear that conveyancers should not be opening themselves up to these criticisms, just so they can receive repeat ‘business’ via the developer, and they must ensure the client comes first. While we know these arrangements can be beneficial to the buyer due to the conveyancer’s in-depth knowledge of the estate and paperwork – vital when working to the tight deadlines set by developers -clearly acting in the buyer’s best interest will always be paramount.
  • Thirdly, on the subject of ground rents there has already been some success with some developers already having agreed that future ground rent increases will be based on RPI, rather than a doubling of the amount at each rent review. They have agreed to remove such clauses from their leases and this is clearly a major step in the right direction and one that all developers should voluntarily agree to.
  • The valuation of reversions using the hedonic regression method, and the risks of forfeiture, were also debated with the suggestion there should be a root and branch review rather than a dabbling around the edges.

As mentioned, Gavin Barwell was in attendance, and responded to many of the issues raised, with a great deal of sympathy for the plight of those mentioned by others MPs. He stressed how he was “not comfortable” with the current state of affairs, pointing out that in a recent survey, 57% of respondents said that they regretted buying leasehold, and he also confirmed that the Government recognised a significant problem exists. Barwell did stress that Commonhold was not under his remit but that Parliament would also review this. Finally, he also referred to the Law Commission’s 13th Programme of Law Reform and confirmed that the Government is keen to work with the industry to stamp out unfair abuse of leasehold, and that he will put forward plans on this in the new year.

The CA will continue to work with the industry to ensure any such review is as wide ranging as possible to ensure tunnel vision around escalating ground rents does not mean unreasonable administration charges and the delays caused in the home moving process are over looked.

Overall, not only was the debate hugely encouraging just by dint of it being held, but the agreement across both benches, and via the Housing Minister, of the action that needed to be taken was also incredibly positive. There is, of course, some way to go in terms of getting a much fairer leasehold process in place, whereby lease administrators are not able to abuse their position and profiteer, and there is sufficient protection for leaseholders, plus we have a more transparent and quicker process all round. However, I couldn’t help think that a huge step forward had been taken and the CA have already contacted the Housing Minister for a meeting given that we fully intend to play a big part in delivering on this alongside other stakeholders in the industry. We would recommend anyone interested in improving leasehold should contact their own MP to urge them to support the review and to join the All Party Parliamentary Group on Leasehold Reform.

Today's Conveyancer