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Wed 20 Mar 2019

The Housing Communities and Local Government Committee Releases Report on Leasehold Reform

The Housing Communities and Local Government Committee Releases Report on Leasehold Reform

The Housing, Communities and Local Government Committee has released its report on its inquiry into the Government’s progress on leasehold reform, following the conclusion of the Government’s consultation on tackling unfair practices in the leasehold market.

A full copy of the report can be found here:  https://publications.parliament.uk/pa/cm201719/cmselect/cmcomloc/1468/report-summary.html

In summary, the Committee recommended amongst other things that:

1.    The Government should ensure that commonhold becomes the primary model of ownership of flats in England and Wales;

2.    The Competition and Markets Authority should investigate mis-selling in the leasehold sector and make recommendations for appropriate compensation;

3.    The Government should prohibit the offering of financial incentives to persuade a customer to use a particular solicitor;

4.    The Government should require ground rents on newly established leases to be set at a peppercorn (i.e. zero financial value);

5.    The Government should introduce legislation to restrict onerous permission fees in existing leases; and that permission fees are only ever included in the deeds of freehold properties where they are reasonable and absolutely necessary;

6.    The Government should require the use of a standardised form for the invoicing of service charges, which clearly identifies the individual parts that make up the overall charge;

7.    The Government must legislate to require that freeholders’ tribunal costs can never be recovered through the service charge, or any other means, when the leaseholder has won the case;

8.    The Government should immediately take up the Law Commission’s 2006 proposals to reform forfeiture, to give leaseholders greater confidence in disputing large bills by reducing the threat of losing a substantial asset to the freeholder;

9.    The Government should introduce low-interest loans—a Help to Buy scheme for leaseholders—so that leaseholders who want to enfranchise or extend their leases, but cannot afford to or obtain the necessary finance, have the opportunity to do so;

10. The Government should invite, and fund, the Law Commission to conduct a more comprehensive review of leasehold legislation;

Yashmin Mistry, Partner and Head of the Property Practice Group comments on the Inquiry said:

“The Housing, Communities and Local Government Committee has called for “wide ranging reforms to the leasehold system” in its inquiry into Leasehold Reform. The Committee’s Report was published today and a link to it can be found here: https://publications.parliament.uk/pa/cm201719/cmselect/cmcomloc/1468/report-summary.html

The Government has acknowledged that the leasehold system is not working in consumers’ best interests and needs to be reformed.  The report urges the description of “home ownership” to be dropped when referring to leasehold property. It suggests instead that they should be marketed as “lease – rental” instead.

The Committee recommends the Government ensure that “Commonhold” becomes the primary model of ownership of flats in England and Wales, as it is in many other countries.

On first reading it is welcoming news to see that the Committee considers any ground rent as onerous if it materially affects a leaseholder’s ability to sell their property or obtain a mortgage. This may be a great hope for leaseholders trapped in existing onerous ground rent schemes up and down the country. However, it may not be as easy or cheap task to set up a publicly funded ground rent compensation scheme for existing ground rents as suggested in its Report. Compensation on the other hand for mis-sold leases may however be slightly more realistic. The Committee has however passed the task to the Competition and Markets Authority to investigate mis-selling and make recommendations for appropriate compensation.”

Yashmin was also asked by Lexis Nexis for her comments yesterday and a link to the full article can be found here.

For more information on the results of the Inquiry or leasehold generally, please contact Yashmin Mistry on email: ymistry@jpclaw.co.uk or tel: 0207 644 7294

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice.

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