Introduction

1.1    Leasehold is a significant and increasing tenure for new homeowners. On 6 April 2017 the Department for Communities and Local Government published statistics estimating there were 4.0 million residential leasehold dwellings in England in the private sector in 2014/15.

 

1.2       The percentage of residential sales that were leasehold grew across England between 2011 and 2015. Land Registry figures show that leasehold made up 43 per cent of all new-build registrations in England and Wales in 2015, compared to 22 per cent in 1996. Many parts of England have seen an increase in the development of flats which are sold on a leasehold basis.

 

1.3       The last major legislative reform to leasehold was the Commonhold and Leasehold Reform Act in 2002, although the Government took action in 2014 to cap repair charges imposed on leaseholders by government-funded public sector landlords. Leasehold legislation is complex and spread across several Acts of Parliament. Many prospective leaseholders are not fully aware that this form of tenure involves a landlord – tenant relationship, or of the significant financial and other interests they sign up to, or the range of rights and responsibilities for each party as set out in the formal contract between them: the ‘lease’. Redress is mainly through courts and tribunals, which can be costly and prolong uncertainty.

 

1.4       Concerns regarding the transparency and fairness of selling new houses on a leasehold basis and about the level of ground rents were raised in a House of Commons debate in December 2016. The All Party Parliamentary Group on Leasehold and Commonhold is also advocating for reform in these areas.

 

1.5       Sajid Javid, the Secretary of State for Communities and Local Government, has stated “as a government committed to building a fairer society, I don’t see how we can look the other way while these practically feudal practices persist”. In addition Forward Together, the Conservative and Unionist Party Manifesto 2017 commits to ’crack down on unfair practices in leasehold’.

 

1.6       The Government’s Housing White Paper ‘Fixing our broken housing market’ published in February 2017 highlighted the Government’s aim to improve consumer choice and fairness in the leasehold sector and committed to consult on a range of measures to tackle unfair and unreasonable abuses of leasehold. It cited new leasehold houses and onerous ground rents as areas where the most urgent reform may be needed, and signalled our intention to look at wider reforms in the medium-term. This consultation seeks views on such reform. It also explores measures to exclude leaseholders from possession orders due to ground rent arrears, as allowed by the Housing Act 1988, and measures to provide freeholders with the right to challenge the reasonableness of service charges on private estates via the First-tier Tribunal (Property Chamber).

 

1.7       This consultation applies to England only and asks specific questions on:

i)             Prohibiting the sale of new leasehold houses (with possible exceptions where developers are obliged to sell a house on a leasehold basis.)

ii)            Possible changes to the Help to Buy scheme in relation to leasehold houses.

iii)           Limiting the starting value and increase of ground rents on all new residential leases over 21 years.

iv)           Updating Ground 8 of the Housing Act 1988 so long leases over 21 years with an annual ground rent over £1,000 in London and £250 outside of London cannot be an Assured Tenancy.

v)            Providing freeholders on private estates with equivalent rights to leaseholders to challenge the reasonableness of service charges via the First-tier Tribunal (Property Chamber).

vi)           Areas for future leasehold reform.



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