Reform – What did the Leasehold Advisory Service suggest?

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Quote: “LEASE is an Executive Non-Departmental Public Body sponsored by DCLG to provide initial advice on leasehold law to leaseholders in England.

LEASE submitted it’s response to the DCLG on 21 September 2017. The response states that LEASE is responding “On behalf of an organisation serving leaseholders.

My understanding of LEASE, and I am open to correction here, is that over its period of existence it has been rather more than an organisation “serving leaseholders”. It’s website does say: “LEASE was set up in 1994 to provide free information, initial advice and guidance to members of the public about residential leasehold and park homes law.” Perhaps that phrase “members of the public” was open to wider interpretation than ‘leaseholders’ if only based on reports by the charity Leasehold Knowledge Partnership?

New build leasehold houses

In their response, LEASE agrees with limiting new build leasehold houses, except for shared ownership, community land trusts, and where the developer does not hold the freehold (conceding this would need loophole management).

Me: Given the government’s stated intention to ban new build leasehold houses and LEASE’s face value agreement with this, LEASE goes on to list alternatives to this approach, for no obvious (to me anyway) reason.

Reasonable ground rent

As to a reasonable ground rent, LEASE suggests a cap of £500 and never more than 0.1% of value. Maximum rate of increase: by RPI with increments not less than 25 years.

Me: As I have mentioned before, I do not see the method by which an ongoing lease would be valued for the purposes of determining a 0.1% ground rent. Perhaps I am missing something obvious? The tortuous process of the hapless leaseholder paying valuers at every ground rent review, presumably with both parties having right of appeal to a tribunal, would hardly seem to be a fair solution?

Help for existing victims

As to ideas for helping existing victims of onerous ground rents, LEASE makes a bold suggestion for retrospective action. They suggest a cap on the calculation of capitalised GR for enfranchisement of houses (i.e. mentioning LRA 1967 – no mention of the 1993 Act). Perhaps LEASE believes no flats have onerous ground rents? Lease also suggests the same cap as for new builds.

Me: I like the bold suggestions here but confused at the omission of the 1993 Act. Was it intended to omit existing flats with onerous ground rents?

Voluntary solutions

As to any voluntary routes for tackling new leases, LEASE suggests there are none.

Me: Wholeheartedly agree.

Wider reforms

As to wider reforms (Q21), LEASE suggests regulation of managing agents with licensing and formal entry requirements. LEASE suggests abolishing forfeiture, consolidating what it calls the Gordian Knot of existing leasehold law, reforming the Commonhold statutes and a sunset provision for the creation of new leasehold titles.

Me: All good. Very good.

Lease suggests a Model residential long lease and raising the current threshold for s20 consultation.

Me: I want leasehold abolished, but I did suggest a prescribed Deed of Variation in lieu of this event for extensions. A Model lease would certainly avoid the existing dog’s dinner of poor or unfair drafting, needing endless expensive tribunal hearings to decide what this or that lease means.

I do not understand the point of adjusting the s20 threshold in isolation of the courts having effectively abolished any threshold, placing the onus on leaseholders to prove ‘prejudice’ if not consulted.

As to collective enfranchisement and lease extensions, LEASE suggests requiring the freeholder to make realistic counter proposals.

Me: I have covered this in other posts. At present the leaseholder must make a realistic offer but the freeholder can counter with any crazy amount AND still charge the leaseholder for a valuer.

LEASE suggests reforming leasehold conveyancing.

Me: This suggestion seems universal.

In conclusion, yet again the obvious omission is any proposal that all existing leasehold tenure should be converted to commonhold, or at least facilitated to that end with fair and workable conversion rights that do not need the freeholder to consent, all mortgage providers, and all leaseholders.

Whatever the hurdles, there has to be a solution. The freeholder should not get to block the conversion. Mortgage providers presumably simply need clarity from government as to how Commonhold works around the world and allows communal units to maintain value as a charged asset.

As for leaseholders, I cannot see an obvious reason why a properly informed leaseholder would opt to keep a depreciating asset in favour of one that would not depreciate? It is not as if they would be facing expropriation, they would gain an interest in the freehold estate. The issue would presumably reduce to management? I guess this is where the constant claims by the industry that leasehold tenure is largely accepted with happy campers might be exposed.

It would need to be transparent as to who did the asking, mind. Not managing agents!

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