Proposed reforms around leasehold are reported to have been “quietly axed” with retrospective legal action and the knock-on effect on pension funds being cited as reasons for the Treasury withdrawing its support.
Housing Minister Michael Gove introduced the legislation in November 2023 shortly after the King’s Speech, describing it as ‘a landmark moment for millions of leaseholders across the country (delivering) significant new rights and protections, (slashing) unfair costs and crack(ing) down on exploitation.’ But reports in the national press over the weekend suggested that the Treasury will not back leasehold reform.
The issues are twofold; a proposed cap on ground rents and plans to reduce grounds to a peppercorn rate would, it was hoped, create an incentive for landlords to offload freeholds to the leaseholders. But with pension funds investing billions in buying up freeholds for blocks of flats, ministers are concerned that leasehold reform could wipe out between £15 billion and £40 billion of investment and disincentivise investment in new developments.
In December Trade body the Residential Freehold Association (RFA) warned that plans to retrospectively introduce a cap on grounds rents would result in investors seeking compensation from the Government. At the time it estimated the cost to be as much as £31bn. Housing campaigners say the potential impact has been greatly exaggerated.
The second issue is warnings from government lawyers that making retrospective changes to property rights could leave ministers open to legal challenge.
Leasehold reform has been a significant part of Michael Gove’s agenda as Housing Minister. In February 2023 he called for the abolition of leasehold, describing it as ‘feudal’, but was forced to backtrack May as abolition was ruled out. Reform has however been on the cards in the months since and was a key part of the King’s Speech in November, with the ‘Leasehold and Freehold Reform Bill’ introduced into Parliament just two weeks later. It’s introduction wasn’t without controversy though as the landmark bill, which it was said would introduce a ban on new leasehold tenures, had been hastily drafted and omitted one of the key elements of the legislation.
17 Responses
“Hastily drafted” – like so much flipping legislation. Stop rushing like a bull in a china shop, talk to the people at the coal face, get their viewpoints, across the board, and then let the mature conveyancers have a look at the draft before proceeding.
Another poke in the eye with a sharp stick for leaseholders.
Surprise surprise surprise. Yet another u turn by this useless government and useless conservative party. Quite clearly bowing down to the pressure of money and business. Yet again leaving the poor British public in a hole. I can see it coming now, blame Solicitors for all the woes of Leasehold and batter their indemnity insurance until the premiums are so high that firms shut. Labour are no use either, both of them jumping on the bandwagon with no clue and no plan. The least they can do is bring about legislation to sort out the Housing Act 1988 (that surely is a quick fix to that problem) and make Management Companies more accountable to their tenants and to legislate what they can charge for and what they can’t.
This is brutal for us leaseholders who had so much hope. I will never vote conservative again; they are finished.
Leasehold absolute joke extending lease should be abolished
Leasehold reforms were always going to be very difficult. The moment investment and pension companies brought up freeholds they were never going to let go of their investment. It impacts too many people, no government would ever compensate them for that and they were not just going to write off all that money. Property has always been an investment vehicle in this capitalist society. However, that is not to say that reforms cannot be made. a) they don’t have to reduce everyone’s ground rent to £0, limiting it to £250 outside of London and £1000 inside of London would have sufficed b) they can quite easily exclude the forfeiture provisions under the housing act 1988 from long tenancies i.e. over 7 years c) they can quite easily limit the marriage value for extending leases or use a different calculator d) they can quite easily bring in reforms to Management Companies and make sure they work for tenants e) they can quite easily make doubling ground rents illegal and state that every lease clause will have an escalation of every 20 years using the same calculator. People forget that in shared ownership, there is already a stock government approved Lease in effect that can be downloaded from the internet. It can be done! Leasehold has already been with us and will always remain. That is fact and that won’t change. The Tories and Labour were stupid to even think it would ever be got rid of. They’ve got to make it work better for the consumer. I believe that it can and there is no reason why it shouldn’t. The question is, do the Tories or Labour have it in them to fight for the ordinary person?
Very thoughtful and informative. Please pursue this with your MP. I’d back it fully.
A
Pension funds in other countries without the leasehold system seem to function ( unless they invest in UK freeholds). In any case the problem seems to be not just about ground rents but the exploitation by their agents The Service/Management Companies that they use in order to impose crippling and exploitative charges. I pay £625 per month and get little more than monthly window cleaning and occasional lawn mowing of the shared space behind the block of flats where I live.
What you say makes perfect sense, which sadly is probably why it will never happen.
Spot on!!
The government appears to have opened it’s eyes to se the terrible damage it would do to investor confidence if they proceeded rip away years of practise and legislation to please a few broad boy buy to let landlords. Anyone who bought a house or flat with a contract they didn’t understand needs to sue their solicitor or else accept the fact that they got a property a lot cheaper than it would have been on a freehold. The alternative is to buy out the freehold with hard cash instead running around begging naïve politicians to do the dirty work for them
Sounds like the words of someone with a vested interest in the leasehold system! And no, Leasehold properties are not cheaper than Freehold equivalents. Perhaps you can explain how Scotland managed to remove a system that was initially only used for ownership of flats in the UK? Also, many solicitors and estate agents are still clueless about what leasehold for home owners actually means, and specialist solicitors are required to purchase the freehold on a property.
This is the exact argument slave-holders made when they were introducing abolition.
Our Waterloo Quay Tenants Association have for over 20 years tried to simply get the Services we pay out Management company for.
As Chair of our Association I personally went to an LVT in the Liverpool Family Court, invested £500 of our own family money to have our complaint heard. It was in respect of our CCTV security cameras not working. This system is an actual requirement in our Lease. Under Oath the Director of the Management company claimed they had been Provided Free of any Charge from initial installation.
The Judge accepted this Untrue Statement and found in the Management favour. In turn the Management Company claimed and charged us £7000 in legal costs. Barrett Builders sold the management of our apartment buildings and actually made claims at the time that our management costs would be modest monthly payments of less the 10 percent of what our Regent Management Company now charge us It has actually increased its charges whilst, apart from our excellent garden company’s work, has been virtually non existent during the Pandemic and.subsequently.
We do not want our Freehold Purchase for a bargain price we just want to know our investment in our homes will be available in the years ahead for our Grandchildren.
The term “Feudal” used by Michael Gove cannot be bettered as a description of this iniquitous charge.I had hoped the Tories would show they are party for the future but sadly they have failed once more. As we have seen Leasehold charges are a charter for all sorts of moral bankrupts to proliferate.Perhaps another party can show the way forward.I live in hope!
So regarding the proposed grandfathering of marriage value, this u-turn is a kick in the teeth to cash strapped leaseholders that have waited in limbo and now finding that the abolishment will not apply to them. Why pick who marriage value applies to and who it doesnt? Marriage value is a historic law that penalizes leaseholders that haven’t renewed their lease in time. Why should the difference between 80 yrs and 79 years and 364 days remaining on the lease more than double landlord profits? It’s a crude and underhanded approach for wealthier freeholders to capitalize on poorer leaseholders
There is undoubtedly a lot of abuse of the leasehold system and that is what needs to be addressed. The alternatives of commonhold or management associations of the freeholders will make Leasehold look like paradise. It is either untrained freeholders trying to manage the maintenance arrangements for a development or a block of flats. OR the freeholders employing management agents to undertake it and that is where we are now. However, the only redress system is to refer to the Courts for anyone who will not, or cannot, pay and that will cause more animosity that can be imagined. There are numerous examples, of which I am aware, where the freeholders are trying to manage the communal parts joint service provision etc and they are tearing communities apart. Of course it can work, but it can also fail.
Be very careful what you wish for