Leasehold and Commonhold Reform

Esther McVey Excerpts

Thursday 31st October 2019 Written Statements

[The Minister for Housing (Ms Esther McVey)]

During the leasehold and commonhold reform Westminster Hall debate on 2 October, I pledged to sett out in full the actions the Government are taking on leasehold and commonhold reform. [Column 366WH]

The Government are taking forward a comprehensive reform of leasehold and commonhold, so it is fairer for homeowners. We responded on 27 June 2019 to the technical consultation on leasehold reform which set out how our plans will work in practice. We will legislate to ensure that, in future, apart from in exceptional circumstances, all new houses will be sold on a freehold basis. We will also reduce ground rent to zero on new leases and will improve how leasehold properties are bought and sold by setting fixed time frames and maximum fees for the provision of leasehold information. We will implement these changes when parliamentary time allows.

We are also working with the Law Commission to:

standardise the enfranchisement process, so that buying a freehold or extending a lease can be made easier, quicker and more cost-effective.

review how commonhold works, so that it is a viable alternative to leasehold for both existing and new homes.

make it easier for leaseholders to obtain the right to manage, in both straightforward and complex developments.

The Law Commission will report back to Government on options to reform the valuation process this autumn, and on all three projects in February 2020.

In March 2019, we launched an industry pledge which commits freeholders to identifying any lease with ground rent terms that double more frequently than every 20 years and contacting leaseholders to offer to amend the terms. The pledge has been signed by more than 60 leading developers, freeholders and managing agents. We will continue to monitor its effectiveness and take further action as necessary.

The Competition and Markets Authority (CMA) announced in June 2019 that it will carry out an investigation into the mis-selling of leasehold properties. The CMA will use its consumer protection powers to determine whether leasehold terms—including onerous ground rents and permission fees—can be classified as “unfair”. If the evidence merits it, the CMA will consider whether to bring forward enforcement proceedings. We look forward to receiving the outcome of this work.

We have also:

made it easier for leaseholders to form recognised tenants’ associations (RTAs). We will shortly be reviewing this legislation to see how effectively it is working in practice;

worked with trading standards to improve information on accessing redress through the publishing of new guidance, which will help current leaseholders understand the redress process better;

committed to implement most of the Law Commission recommendations in its 2017 “Event Fees in Retirement Properties” report. We will consider two recommendations (on succession rights and a database of leasehold retirement properties with event fees) further to determine the most effective way of improving the system for consumers;

asked the Law Commission to update its 2006 report, “Termination of Tenancies for Tenant Default”, so that we can consider next steps on the law of forfeiture;

committed to introducing legislation to extend mandatory membership of a redress scheme to all freeholders of leasehold properties;

set out our intention to give freehold homeowners the same rights as leaseholders to challenge the reasonableness of estate maintenance fees, and to apply to the tribunal to appoint a new manager;

committed to ensuring homeowners cannot be subject to a mandatory possession order for minor ground rent or rentcharge arrears;

announced in March 2019 that we will address the issue of legal costs. We believe leaseholders should not be subject to unjustified legal costs and will close the legal loopholes that allow this to happen;

We have also committed to regulating managing agents and to improving the transparency and fairness of service charges. This includes introducing a single mandatory and legally enforceable code of practice to set standards across the sector and requiring agents to be qualified to practice.

Last October, we established an independent working group, chaired by Lord Best, to take this work forward. They looked at how standards can be raised across the property sector and how fees such as service charges should be presented to consumers. The working group published its final report to the Government in July 2019, and we are considering its recommendations and will announce the next steps in due course.

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