Potential Shift Away From Leasehold Property And Improved Conditions For Leaseholders
Sometimes in this industry you feel like you’re at the start of a journey towards change, however most of the time the end point and goal appears to be a long way in the future.
It’s rare however for that change to be within touching distance however when it comes to the leasehold reform I believe we all want to see enacted that does now appear to be the case. Indeed, with every day that passes we get that little bit closer to a much fairer system for existing and new leaseholders, but also I suspect closer to a shift away from leasehold entirely.
Of course, this has not been an easy journey, and the industry has had to fight hard against plenty of vested interests which would probably have preferred the status quo to live on. Indeed although our leasehold campaign has now been running for more than five years, in truth, it was the up-swell of consumer pressure that delivered a ‘hearing’ Ministry rather than just a ‘listening’ one.
However, given the media furore that has gained plenty of traction around the ‘leasehold new-build scandal’ plus of course many of the stories we’ve heard about the length and costs existing leaseholders have had to go to in order to either buy their freehold, or carry out simple works to their property, plus the focus on Lease Administrators and the delay/cost that home movers come across just to get information on their leases, then the situation was always going to have to change.
Plus we have had a Government that is committed to reform in this area, and very importantly, what we might call ‘cross-party agreement’ within the housing market – not least the conveyancing sector. It has also helped that, politically at least, this is also an agenda that few would argue against and therefore the Government (even a minority one) has felt it has the backing of all kinds of political persuasions to be able to drive this forward. How often has it been able to say that in this Parliament?
As you may know, our most recent focus has been on the Law Commission’s leasehold enfranchisement reform consultation which closed for responses on the 7th January. This was, by no stretch of the imagination, a ‘slight concern’ – anyone who reviewed the consultation itself and the questions it asked of respondents will know fully that this was as incredibly in-depth appraisal of leasehold with the view to eliciting some full and frank answers as to how a fairer deal could be struck for the leaseholder.
An unusual, but welcome, move from the Government was to specifically instruct the Law Commission that they were to find a better deal for leaseholders, it would appear, even at the detriment of the landlord. As lawyers, we would inevitably want to see a fair balance of benefit and burden between parties to any deed but when a leaseholder does not even have the information to understand what the deal is at the point that they make their offer, it is inevitable that the pernicious practices of some developers would spread.
What is vital now is to bring fairness to the relationship and, let us be crystal clear, it is not fair to have to continue to pay chunks of cash for the home you bought at full market value in the first place.
Leasehold, as a wasting asset, is a problem but lease arrangements can work very well where suitably long lease terms are granted, and by this we mean something much longer than 125 years, where ground rent is capped to below the Housing Act thresholds and where there are statutory controls on the nature, time and cost of delivery of all lease administration services.
Our response was based on allowing leaseholders in the future to be able to extend their lease in a ‘unified and stable way’ without the vast amount of cost this currently requires. We want to ensure leaseholders have full confidence in their ability to do this, and the system will work to allow them to achieve this, rather than against it, as it appears to have done for some many.
Following on from our further response to the MHCLG’s consultation on implementing reforms to the leasehold system and, rather importantly, the Law Commission’s other consultation on Commonhold, we now appear to be at a point where all the organisations who can deliver change, have the necessary feedback and information to be able to do so.
Commonhold is an important part of this and the CA has been focused on outlining its benefits, and ensuring that it is understood that its low uptake is nothing to do with the Commonholder’s experience (our survey of Commonholders indicated that the majority would recommend Commonhold) but because of the lack of incentive for developments to be created Commonhold.
Readily understood by generations of Frasier, How I met your Mother or The Big Bang Theory watchers, Commonhold is our equivalent of condo living. If anything it is first amongst equals, and we will continue to lobby hard for increased take-up of Commonhold, with (hopefully) the strength of the consumer, MHCLG and the Law Commission supporting the call for a flexible and fair tenure where property owners control their own destiny and can live, shop, relax and work side by side in well-managed, appropriately-funded developments.
Overall, we are confident that 2019 can be the year when we see tangible commitment to beneficial change in this area. Those who have campaigned so forcefully, should be proud of bringing us to the cusp of reform. We must not waste this opportunity through fear of the unknown or the straightjacket of inertia. It is time to be bold and imaginative and carve out a selection of tenures which will be fit for purpose for many centuries to come.
Beth Rudolf is Director of Delivery at the Conveyancing Association