Leasehold market “desperately” needs reform, argues Bob Blackman MP
The Housing, Communities and Local Government Committee have released a report calling for serious reform to the leasehold system. We spoke to Bob Blackman, a member of the committee and MP for Harrow East, about the committee’s proposals.
The report, published last month, highlighted that key elements of the current system were “open to abuse.”
Chief among these potential abuses was “onerous” ground rents combined with opaque service charges and one-off bills. In terms of these ground rents, the committee found that some developers had imposed 10- and 15-year doubling ground rent terms.
This left some leaseholders unable to sell their property or re-mortgage. The committee summarised that leaseholders are not treated as homeowners or customers but as “a source of steady profit.”
A key committee recommendation was that commonhold became the primary model of ownership for flats in England and Wales.
While acknowledging that leasehold ownership may be necessary for complex or mixed-use developments, they stated they were “unconvinced that professional freeholders provide a significantly higher level of service.”
They also criticised widespread mis-selling practices and urged the government to require a standardised key features document. This would clearly set out the duration of the lease and any ground rent or permission fees as well as, if applicable, the price at which the developer may be willing to sell the freehold.
Beyond these general recommendations, the report also forwarded some more specific measures that should be adopted by government.
The report stated it would be “legally possible” for the government to introduce legislation that would remove onerous ground rents and they recommended that these payments should be limited to 0.1 per cent of the present value of the property and capped at £250 per year.
Moving forward, they urged the government to revert to their original plan and require ground rents to be set at peppercorn or zero financial value.
The report also called for greater powers to assist the power of residents in tribunal procedures, calling for the government to legislate to prevent tribunal costs being recouped through service charges.
They also urged the government to adopt the proposals of 2006 Law Commission on forfeiture to reduce the threat of losing a substantial asset to cover large bills.
As well as urging the creation of a cheaper enfranchisement process, they also requested the government introduce a low-interest loan for those who want to extend their leases but cannot obtain the necessary finance.
Bob Blackman, a member of the committee, told the Review that the leasehold market is “broken and desperately needs reform.”
He stated that: “Our committee examined the industry and took evidence from all sides and we came to one conclusion: that the leasehold market is broken and desperately needs reform.
"We now know that ground rents have been doubled in some cases, minor improvements can come with frankly outrageous charges, and that we even have freeholds being sold without the leaseholder being notified.
"Voluntary codes cannot be relied upon and therefore I call on the government to legislate to protect leaseholders and to restore fairness."