Christmas came early this year for leaseholders – well four days earlier to be precise - with the publication of the Government’s response to tackling unfair practices in the leasehold market released on 21 December.
So what can we expect as we go into 2018?
The Government intends to bring forward legislation by July 2018 which is likely to:
- ban the use of leasehold tenure on all new houses (this is to be effective from 21 December 2017, whenever the new legislation is passed);
- ban ground rents on all new leasehold houses and flats. Existing leases will not be affected – however, the Government hasn’t mentioned what happens to the new leases granted between 21 December and when the legislation comes into effect. Will this mean that developers will take it upon themselves to bring the ban into effect early as a marketing initiative? Will buyers hold off making a purchase until the legislation comes into force?
- introduce new ways for developers to create long term arrangements for the maintenance of shared facilities and open spaces on freehold developments. We assume this will mean the end of rent charges and cumbersome arrangements involving deeds of direct covenant. Will the Government go further and reverse the law so positive covenants are binding on successors in the same way as restrictive covenants?
- introduce a minimum length of term for a lease on a new build. This will apply to both houses and flats. Will this be 125 years or longer?
- make the current enfranchisement procedure simpler for houses and flats with the introduction of a statutory formula. Whilst welcome for leaseholders, it is unlikely to be welcomed by any of the big London estates and their advisers;
- give leaseholders of houses the same rights as flat owners to challenge the fairness of their estate charges and to have the right of first refusal so developers will have to offer the freehold to their leaseholders before selling;
- close the loophole under Ground 8 of the Housing Act 1988 to prevent long leaseholders having their home repossessed.
To bring in this legislation, the Government will need to introduce a statutory definition of the term ‘house’ – which may also prevent problems being encountered as to what is a house under the Leasehold Reform Act 1967.
Besides these specific aims, the Government is considering in the longer term:
- regulating managing agents (ultimately it will be leaseholders who will pay for this);
- bringing in tougher legislation to tackle unfair service charges;
- imposing on developers some form of redress scheme for short and long leases affected by some of these issues (the Government gives as a good example the £130 million Taylor Wimpey Ground Rent Review Assistance Scheme).
- invigorating commonhold – will this Government be bold enough to finally kill off leasehold for good?
And finally, it is also looking to modernise the whole house buying process (that consultation closed on 17 December 2017).
A busy year ahead!