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Gov response is out – peppercorn ground rents and much more…

21 December 2017

Department for Communities and Local Government has today published the Government’s response to the recent consultation on ‘Tackling unfair practices in the leasehold market’ .

The response is available online on the website.

As you know, the Department ran a public consultation for eight weeks from 25 July to 19 September 2017. The consultation received over 6,000 responses, mostly in favour of radical change, demonstrating that leasehold has become a matter of wide public interest. 

In the opening remarks of the response, Sajid Javid, Sec State for Communities and Local Government, said “Leasehold has been a part of the UK’s housing landscape for generations, usually put to sensible use in buildings with shared fabric and infrastructure, such as blocks of flats. Leasehold should be just that, a tool for making multiple ownership more straightforward. It should not be a means of extracting ever-more cash from the pockets of already overstretched housebuyers. Yet, in the hands of unscrupulous freeholders, that is exactly what it has become…   …These practices are practically feudal and entirely unjustifiable…”

Through the response to the consultation, the Government is setting out a range of measures to crackdown on unfair leasehold practices, which include:

  • introducing legislation to prohibit the development of new build leasehold houses, other than in exceptional circumstances;
  • restricting ground rents in newly established leases of  houses and flats to a peppercorn (zero financial value);
  • addressing loopholes in the law to improve transparency and fairness for leaseholders and freeholders; and
  • working with the Law Commission to support existing leaseholders – including making buying a freehold or extending a lease easier, faster, fairer and cheaper; reinvigorating commonhold to provide greater choice for consumers; and to take forward the work in our recent call for evidence on regulating managing agents (‘Protecting consumers in the letting and managing agent market: a call for evidence’).

Our reading is that this will not happen immediately. Brexit is mopping up a good deal of legislative capacity and the likelihood is legislation could be brought forward in the second session, in 2019/2020. That said, DCLG has strengthened its leasehold/PRS team. The 13th Law Commission programme of law reform will likely be focussing on leasehold reform, also commonhold.

The government is sending a clear message that it wants to see meaningful improvements in our sector. Early in the New Year, I am expecting a similarly robust push for change with the regulation of managing agents and how they are qualified/accredited and held to account. As I said in our IRPM Christmas message only this morning, “IRPM is preparing for the changes that are coming in our sector”.  This response from government is just the beginning but if it ends in a happier leasehold sector, with more trust and transparency between the parties, then our industry is heading into a healthier and more professionalised space. That has to be a good thing for IRPM qualified professionals.

Hopefully this will be the last IRPM bulletin of 2017. Have a good holiday and come back fresh for what promises to be a lively and fascinating 2018!

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