Housing, Communities and Local Government Committee releases its report on the Government’s leasehold reform program

19 March 2019

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.

The Committee recommends:

1. That 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 require the use of a standardised key features document, to be provided at the start of the sales process by a developer or estate agent, and which should very clearly outline the tenure of a property, the length of any lease, any ground rent or permission fees, and—where appropriate—a price at which the developer is willing to sell the freehold within six months.
4. The Government should prohibit the offering of financial incentives to persuade a customer to use a particular solicitor.
5. That a ground rent is onerous if it becomes disproportionate to the value of a home, such that it materially affects a leaseholder’s ability to sell their property or obtain a mortgage. Consequently, existing ground rents should be limited to 0.1% of the present value of a property, up to a maximum of £250 per year. They should not increase above £250 over time, by RPI or any other mechanism.
6. The Government should revert to its original plan and require ground rents on newly established leases to be set at a peppercorn (i.e. zero financial value).
7. 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.
8. The Competition and Markets Authority should indicate its view as to whether onerous leasehold terms constitute ‘unfair terms’ and would be, therefore, unenforceable.
9. 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.
10. The Government should implement a new consultation process for leaseholders affected by major works in privately-owned buildings. A threshold of £10,000 per leaseholder should be established, above which works should only proceed with the consent of a majority of leaseholders in the building.
11. 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.
12. 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.
13. The Law Commission should recommend a process that will make enfranchisement substantially cheaper.
14. 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.
15. The Government should invite, and fund, the Law Commission to conduct a more comprehensive review of leasehold legislation.

The Committee also concluded that the Government should undertake a comprehensive review of LEASE and that it should appoint leaseholders to the Board of LEASE. LEASE’s Chair, Wanda Goldwag, said:

‘We welcome the report and we are pleased to be able to say that work is already underway to implement the findings and recommendations arising from the Government’s review of advice and support for leaseholders in England. The review looked very closely at LEASE and included consultation with our stakeholders.

The work to re-engineer LEASE over the next 18 months is underway, with the support of MHCLG, and will see LEASE positioned to do more and better for leaseholders in England and Wales.’