There has been general support from the industry for the government’s apparent intention to ban new homes in England being sold as leaseholds.
An eight week consultation period has now formally started, with government proposals contained in a 34-page document calling for:
setting ground rents to zero levels – in recent years these have increased significantly, in some cases doubling every 10 years;
closing legal loopholes to protect consumers – such as leaving some leaseholders vulnerable to possession orders;
changing the rules on Help to Buy equity loans so that the scheme can only be used to support new build houses on acceptable terms.
The consultation also seeks views on excluding leaseholders from possession orders because of arrears of ground rent; and views on freeholders being able to challenge service charges for mixed tenure estates with shared facilities.
The Conveyancing Association has given its back to the proposals.
“We ... hope they will deal with the single biggest loophole, the Commonhold and Leasehold Reform Act, which currently excludes leasehold homeowners from having any protection from unreasonable fees and unreasonable delays when buying, selling or simply improving their property” explains Beth Rudolf, the association’s director of delivery.
“This loophole means that one particular landlord openly continues to charge £300 for a Deed of Covenant when the First Tier Tribunal issued a judgement against them three years ago saying these should only cost £80” she adds.
The CA is shortly undertaking a research study on Commonhold in a bid to understand what it would take to make Commonhold a viable alternative to leasehold.
Martin Bikhit, managing director of London agency Kay & Co, also regards this as good news. “High ground rents substantially increase the cost of a lease extension or the purchase of the freehold of a property, so this proposal will make things much fairer for buyers in the long run” he says.
Meanwhile Mark Farmer, a government advisor on construction and a well-known figure within the industry, says the initiative is a step in the right direction.
“Banning developers from selling new-build houses on leasehold agreements to drive additional revenue may help recover some of the confidence that the public has lost in the sector. Without action on this and the parallel housing quality debate there is a real risk of buyers starting to move away from new build stock which would be a disaster for housing supply" he says.
However, while Louie Burns - managing director of Leasehold Solutions - also welcomed the government’s consultation, he cautioned there was much more to do beyond that.
“The leasehold scandal is a very serious situation and goes deeper than new build leasehold houses. There are already thousands of flat owners caught up in leasehold properties paying extortionate ground rents and onerous service charges. Leasehold Solutions is now keen to see what the government's plans will be to help those already living a leasehold nightmare, and when legislation will change to help those people already trapped by leasehold" he says.
You can see the full government consultation document here.