In an attempt to end the abuse of the leasehold system in the UK, the Government’s Housing Minister, the Rt Hon James Brokenshire MP announced on Monday 15 October that the Government will be holding a second six week consultation into the matter.
To achieve a comprehensive view of this issue, representations from all interested parties are welcomed. Lease and freeholders, landlords, conveyancers, management companies, developers, local authorities, investors and lenders, and estate agents and solicitors are all invited to share their views during the consultation.
Leasehold properties form a significant part of the British housing market. Governmental figures dating from 2015-16 showed that there were around 4.2 million residential properties held on a leasehold basis, of which around two thirds, or 2.9 million, are flats.
While the average ground rent is in the the region of £300 per annum, some househoulders are finding themselves paying as much as £700 each and every year.
Leaseholds have been a contentious matter in the UK for some time.
Led by the then Housing Secretary Sajid Javid, the Government first held a consultation into the issue in 2017, where they received 6,000 responses from a wide range of interested parties. The vast majority of these responses were in support of widespread reform of the leasehold system.
Leaseholds Common With New-Builds
While leaseholds are more likely to apply to flats with common areas, there has been a trend in the new-build housing market for selling properties as lease rather than freehold.
Housebuilders such as Taylor-Wimpey have increasingly sold their properties on a 999 year leasehold basis, with the right to double the ground rent every ten years written into the lease agreements.
And with more and more lenders, including the Nationwide, refusing to lend on properties that have overly burdensome ground rent terms, some homeowners are finding themselves trapped in their own homes unable to sell their properties.
Speaking on the matter of leaseholds the Communities Secretary, the Rt Hon James Brokenshire MP said “Unfair ground rents can turn a homeowner’s dream into a nightmare by hitting them in the back pocket and making their property harder to sell.
“That’s why I’m taking concrete action to protect homeowners and end those unscrupulous leasehold practices that can cost tenants hundreds of pounds.”
The proposals being suggested in the consultation are wide ranging. They include ensuring that the vast majority of newly built homes would be sold as freehold, and reducing new leasehold rents to a nominal £10 per year.
Existing Leaseholders To Be Protected, Too
For existing leaseholders, the Government will work with the Law Society to make it easier and faster to buy a freehold, and it will also ensure that tenants are protected against unfair rental costs.
The consultation will also seek opinions on what fair and appropriate exemptions should be made, for example, for shared ownership and community-led housing.
In addition, for those living in flats, it would become easier for leaseholders to form tenant associations, through reducing the minimum number of members required.
This is aimed to give tenants greater power and protection against management companies and landlords.
However, there are criticisms of some aspects of the policy, with some claiming that while these proposals will benefit new leaseholders, those with existing leasehold arrangements could find it much harder to sell their properties, as new build properties become more attractive to potential purchasers.
The consultation will run for six weeks, with respondents able to participate via online survey form, email, or written response.