Government to shake up leasehold in 2018?

Xmas 2017

After weeks of anticipation, the government today finally announced its response to its “Tackling Unfair Practices” consultation process that had attracted 6075 submissions. A huge level of engagement.

I was not expecting more than a bland holding statement along the lines that the DCLG had agreed to fund the leasehold element of the recently announced Law Commission programme. This would nicely have kicked any need for implementing actual reform down the road, perhaps as far as the next scheduled general election.

It was a pleasant suprise to find that the Secretary of State Sajid Javid went much further, even if nothing announced will of itself give relief to existing leaseholders. The direction of travel was the huge surprise.

Download the DCLG response here.

It is to be hoped no government again can roll back on the sentiments now commited to writing as occurred after the cynical mess that was the 2002 Act, what with it’s held back and later quietly dropped reforms and the even more outrageous 1993 Act with its built in incentive for landlords to maximise income. In any political issue, basic principals are important to nail down. In today’s foreward, Sajid Javid makes some clear cut statements:-

“Leasehold … should not be a means of extracting ever-more cash from the pockets of already overstretched housebuyers.”

“It’s telling that people with experience of buying and living in a leasehold property are the keenest proponents for change. The system as it stands is clearly not working for them. “

“… it’s clear to me that real action is needed to end such abuses and create a system that works in the best interests of consumers. And that’s exactly what this government will deliver.”

On twitter today, Sajid Javid was just as clear…

Javid Tweet 21 12 2017

Another senior government minister within 20 years calling leasehold feudal! I liked that he didn’t soften ‘feudal’ with ‘practically’ as earlier in the year. Leasehold is feudal. End of description. Worse, it is mis-sold to the public as a genuine form of modern home ownership.

We have been given a clear declaration of intent to enact legislation in 2018 to ban leasehold houses, with some exceptions (always the alarm bell in leasehold reform), and to require all future leaseholds to come with peppercorn ground rent. This latter point was a surprise given the so-called ‘expert’ submissions. I had expected some vague fudge on what constituted ‘onerous’ ground rents.

In addition, the government promises to tackle managing agents (no details) and give consumers greater say over who their agent is (a huge reform it itself) and to improve the sales process.

Next there is a promise to work closely with the Law Commission to ‘reinvigorate’ commonhold (more a need to raise it from the dead?), make enfranchisement easier and cheaper, and protect leaseholders from incurring costs on lease extensions.

Inevitably the devil is in the detail – and the detail for now is absent in most part. During a three hour debate held today in Westminster Hall triggered by the excellent APPG on Leasehold and Commonhold Reform, the housing minister, Alok Sharma, was asked repeatedly to add flesh to the bones of the announced plans, but I did not hear much in the way of detail in his response other than an expectation to publish a bill by the summer recess next year.

It is the daring to hope that is always hardest.

But what is left for now? It is a time for yet more patience and hard to muster hope. Especially on the part of the estimated 5-6 million existing leaseholders being offered little to nothing in the short term, and particularly those with blighted homes due to the worst abuses of the leasehold sector.

I suppose it is foolish to try to read the runes too carefully at this early stage, but I find it interesting how small hints exist for the potential of just another whitewash reform, which in the end could leave as many loopholes to exploit as those allegedly being closed down.

An example is contained in this paragraph:-

“The Government wants to ensure that consumers only pay for services that they receive. We will introduce legislation so that, in the future, ground rents on newly established leases of houses and flats are set at a peppercorn (zero financial value). Costs incurred by landlords for overseeing and appointing a managing agent, or carrying out wider services, can be recovered through the service charge or a marginally higher sales price. This will help ensure that costs are transparent and reasonable, with leaseholders having a right to challenge unfair service charges through the courts.”

Reading this with the jaded experience of so-called leasehold ‘rights’ in practice raises the following questions:-

1. “right to challenge unfair service charges through the courts” is currently a meaningless right because tribunals give landlords huge and never predictable leeway as to what is “reasonable”,

2. landlords use barristers to defend cases and charge back on the service charge even if the leaseholders win their case,

3. tribunal decisions can be ignored with impunity.

4. There is currently no right for a landlord to try to charge for ‘overseeing’ their managing agent as apart from the agent charging a managing fee. Who came up with this proposed new entitlement to charge leaseholders yet further fees? Could even outweigh any banned ground rents?

You have to hope that the words are merely accidental, maybe written by an official who does not know how things operate currently (just as many leases are written badly).

But somehow in context this hope is too much a leap of faith. It pays to look at the very many years that English leasehold has survived various so-called reforming acts largely unscathed and with ever greater opportunity to extract and exploit maximum yield.

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