Government plans to improve leaseholders’ rights

A briefing paper published by the House of Commons last week outlines the Government’s plans for leasehold and commonhold reform.

The paper explores the nature and extent of leasehold ownership and the issues that surround it. It is estimated that there are four million private leasehold homes in England and yet according to a survey by the Leasehold Advisory Service with Brady Solicitors in 2016, leaseholders express a generally negative view of the leasehold experience. 57% say they regret buying a leasehold property.

Most owner-occupied flats are owned on a long lease whereas houses are typically freehold. However, there is a trend within the North West, particularly with new build homes, for houses to be sold on a long lease.

There have been many legislative changes over the years increasing the rights and obligations of freeholders. However, many argue that the balance of power is still tilted towards freeholders and many leaseholders want to see further reform.

Paula Higgins, Chief Executive of the HomeOwners Alliance, has spoken about the need for action: “Unscrupulous players within the industry have turned what has been a form of tenure for centuries into a money grabbing scheme…Doubling ground rents and unfair clauses are leaving homeowners in a nightmare situation.”

Earlier in the year the Government outlined their commitment to improve fairness in leasehold as part of the Housing White Paper, Fixing our Broken Property Market. It also considered whether to encourage commonhold tenure which was introduced under the Commonhold and Leasehold Reform Act 2002. The objective of commonhold tenure was to replace leasehold as the standard form of tenure and to provide a fairer deal for flat purchasers, but in reality this has not happened.

The main ongoing development is the consultation paper: Tackling Unfair Practices in the Leasehold Market. It is open until 19th September 2017.

Suggested reforms include limiting the sale of newbuild houses on a leasehold basis and a requirement for independent legal advice. Developers sometimes encourage the use of a specific solicitor to handle the house purchase. Some buyers have later complained that they were not fully aware that they were buying a leasehold property or what the consequences would be.

Some leaseholders face onerous ground rent charges and there are suggestions to limit ground rents and their subsequent increases in new leases. The Government is keen to hear views on what can be done to help existing leaseholders who are already straddled with unfair ground rents.

The consultation paper also tackles issues surrounding Right to Manage, enfranchisement, lease extensions and dispute resolution. The All Party Parliamentary Group (APPG) has also asked for the Law Commission to be tasked with consolidating the existing legislation into a single Act and for the development of standard lease agreements.

The APPG on Leasehold and Commonhold is pushing for a review on commonhold. As part of the consultation, the Government has said it will look at improving commonhold along with other issues.

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