The King’s speech covered several issues related to the property sector. Below are some opinions from the industry regarding leasehold reform, starting with RICS.
RICS said that it was pleased that legislation will be introduced to make it cheaper and easier for leaseholders to purchase their leasehold property and tackle unfair service charges. It added: ‘This should provide greater protections and certainties for both tenants and landlords. Also, the new Ombudsman offers tenants greater protection and support in challenging unfair practices by landlords.’
Regarding the announcement that it will be made cheaper and easier for leaseholders to purchase their freehold, Linz Darlington, lease expert and founder of lease extension specialists Homehold, comments: “The promises of making it cheaper to purchase a freehold is fantastic news, and hopefully this will also extend to lease extensions. This is likely to include the Government’s promise to enact their ban on marriage value, which will be particularly beneficial to those people who have leases that have dropped below 80 years.
“In many cases this will reduce the cost of a lease extension or freehold purchase by between one-third and two-thirds. The removal of marriage value is something which large freehold investors will almost certainly lobby and litigate against enthusiastically. However, the Government must stand firm on this commitment, because ultimately marriage value is paying a sum to freeholders above what they would receive if they sold their assets on the open market.”
Darlington continues: “Freeholders see leaseholders as an income stream. You are a customer in your own property. This has included everything from escalating ground rents to sky-high service charges and maintenance bills. Often the companies delivering these services are connected in some way to the freeholder themselves.
“To end this exploitation, we first need reform before the next election which removes some of the issues with leasehold – including those relating to onerous ground rents and expensive lease extensions. This should be followed by more comprehensive reform after the next general election.”
Darlington adds: “It is noteworthy that the King’s Speech did not mention the abolition of leasehold, but without making steps towards this, any benefit to existing leaseholders will be limited. To genuinely improve the situation that most leaseholders find themselves in, we need both parties to campaign at the next general election with a compelling alternative for flats. This needs to be a reinvigoration of the Commonhold tenure, which would provide flat owners with control over their blocks and resolve issues relating from high service charges to resolving building safety defects.”
Paula Higgins, chief executive at the HomeOwners Alliance, says: “We were disappointed that ground rents have not been tackled directly, but understand this is a complex area so welcome the opportunity to consult to find the right solution. Ground rents have already been abolished for new homes; so, it is crucial for these rents to be capped or abolished for the 5m existing leasehold homes. Leaseholders will benefit by reducing the annual cost and making it cheaper to extend. It's not right that leaseholders are forced to make these artificial payments and receive no service or benefit in return.
“But the government’s reforms fall short of breaking homeowners free from the shackles of leasehold completely by still allowing the sale and purchase of leasehold flats in the future. This Bill has the opportunity to put a stop to – as Gove referred to it himself – an outdated feudal system. We will continue to campaign for commonhold flats and a ban on leasehold.”
Mark Wilson, founder member of the Association of Leasehold Enfranchisement Practitioners (ALEP) and a RICS registered valuer and managing director of myleasehold, says: “While reform to the leasehold system is very much welcome, it is crucial that the Government addresses potential reform with caution. Other than the easy win of changing lease terms from 90 to 990 year term, the proposed content, such as we are aware of to date, is random and confusing and this is exacerbated by leasehold being an emotive issue.
“With so many moving parts and with so much regulation already in place, including the administrative chaos of the Building Safety Act, I am concerned about the ability to deliver any meaningful reform within the time remaining this Parliament.”
John Midgeley director at ALEP and partner at Seddons Solicitors, adds: “The vast majority of our members - 77% of whom voted in favour of leasehold reform in a recent poll - welcome simplification of the existing system. But given leasehold’s long history and the complexity of law, it is imperative that Parliament scrutinises fully and liaises with specialists in the field to get the detail right.”
