On 27th June, the Ministry of Housing, Communities and Local Government (MHCLG) Select Committee released a summary document on leasehold reforms in response to the technical consultation ‘Implementing reforms to the leasehold system in England’.
Leasehold enfranchisement has been in the spotlight now for many months, and with the furore surrounding this issue it is crucial that leaseholders are well informed and educated. ALEP and Bishop & Sewell welcome the opportunity for sector-wide reform and clarification as set out in the MHCLG’s response paper.
The consultation’s aim was to tackle exploitative practices in the leasehold sector. In his ministerial foreword, the Rt Hon James Brokenshire MP states:
“I am going to make this easier, so people can make the biggest purchase of their lives with confidence, with transparency and fairness at every stage for leaseholders and freeholders alike.”
ALEP members and representatives were closely involved in the consultation and key leasehold reforms have been detailed in the response. These include:
- Restricting ground rents on newly established properties to a peppercorn (zero financial value), as opposed to a financial cap of £10 per year. This will ensure leaseholders only pay for services they receive, as ground rent on newly established leases will be £0.
- When selling a leasehold property, the Government has set a turnaround time of no more than 15 days for managing agents and freeholders to supply leasehold information about the property to prospective buyers.
- To promote clarity, the Government will provide a legal definition of a ‘house’ as part of a forthcoming Bill. In the meantime, it agrees the definition of a house should not include properties that are above or below (horizontally divided) another property or associated structure (e.g. underground car park).
- In relation to appropriate redress for homeowners, should a long lease be granted at a ground rent that is in excess of the cap (after the legislation is in force), the Government will give leaseholders the right to apply to the First-tier Tribunal to seek a refund for any incorrectly paid ground rent and any associated costs, without any time restrictions.
- For any freeholders bypassing the new legislation, the Government will allow courts the power to impose a civil fine of up to £5,000 per property on freeholders who charge ground rent unscrupulously.
- Regarding implementing measures to ensure charges that freeholders pay towards the upkeep of communal areas are fairer and more transparent, the Government will legislate to give freeholders equivalent rights to leaseholders to challenge the reasonableness of estate rent charges.
Commenting on the response, Mark Chick, Head of our Landlord & Tenant team and an ALEP Director said:
“Leasehold enfranchisement is highly complex with intricate legislation enforcing practices. Therefore, we always welcome new, fairer regulations that promote transparency and clarity, making the system just for leaseholders and freeholders alike.
For more information, please contact our expert Landlord & Tenant team on firstname.lastname@example.org or call 020 7631 4141.