June 24, 2024 10:11 am

Insert Lead Generation
Nikka Sulton

The Association of Leasehold Enfranchisement Practitioners (ALEP) believes that the effort to reform leasehold arrangements is far from complete. Despite recent legislative moves, there are still significant steps required to address the concerns of millions of leaseholders.

In their manifestos, major political parties have acknowledged the need for further reform. The Conservative Party has committed to finalising leasehold reforms aimed at improving the situation for more than four million leaseholders. Their plans include capping ground rents at £250 annually, with a goal of reducing these rents to a nominal ‘peppercorn’ rate over time. They also propose measures to prevent the misuse of forfeiture clauses, ensuring that leaseholders do not unfairly lose their property and investment. Furthermore, the Conservatives intend to make it easier for leaseholders to transition to commonhold, a form of property ownership that gives them full control over their homes.

The ALEP emphasises that while these proposals are steps in the right direction, much work remains to ensure that leaseholders receive fair treatment and clear legal protections. The proposed changes are designed to address long-standing issues within the leasehold system, but their implementation will require careful oversight and sustained effort.

The Liberal Democrats have made their stance clear in their manifesto, promising to abolish residential leaseholds and cap ground rents at a nominal fee, allowing everyone more control over their property.

Labour’s policy document highlights the party’s commitment to addressing the shortcomings of the current leasehold system. It states that for many leaseholders, home ownership does not meet the expectations they were given. Labour aims to rectify this by ending the feudal leasehold system where the Conservatives have not succeeded. They plan to implement the Law Commission’s proposals on leasehold enfranchisement, the right to manage, and commonhold. Additionally, Labour intends to ban new leasehold flats, make commonhold the standard tenure, and tackle unregulated and high ground rent charges. They also plan to address the issues associated with ‘fleecehold’ housing estates and unfair maintenance costs.

Association director Mark Chick, who is also a partner at Bishop & Sewell LLP, interprets the Conservatives’ proposal to cap ground rents at £250 and gradually eliminate them over the next 20 years as an indication of a significant shift in policy towards reducing ground rents. This proposal, outlined in the party’s manifesto, suggests that ground rents could be phased out entirely in the long term, a move that could fundamentally change the landscape of leasehold property ownership. Chick believes this approach, while ambitious, aligns with a broader political sentiment aimed at alleviating the financial burden on leaseholders.

Chick further notes that the Labour Party and Liberal Democrats have indicated similar intentions in their own policy documents. Labour promises to abolish residential leaseholds altogether and to cap ground rents, echoing the Conservatives’ stance but pushing for more immediate and comprehensive changes. The Liberal Democrats also pledge to remove residential leaseholds and reduce ground rents to nominal fees, reflecting a shared commitment across major parties to address the leasehold system’s perceived inequities. This bipartisan convergence suggests a strong political will to reform leasehold laws, potentially making ground rents a thing of the past.

However, Chick points out the complexities involved in a complete ban on ground rents, particularly due to potential human rights challenges. He highlights that while the proposals from all three major parties suggest significant reforms, the practical implementation might face legal hurdles. He is particularly interested in the outcomes of the ground rent consultation conducted by the Department of Levelling Up, Housing and Communities in December 2023, and stresses the importance of publishing these results. The publication of these findings will be crucial in shaping the future legislative approach and addressing any legal concerns that might arise from such sweeping reforms.

“At this point, it’s unclear what steps a future government will take regarding ground rents. However, the manifestos suggest at least a move towards capping them.

“When surveyed earlier this year, ALEP members generally opposed a complete ban on ground rents. We have previously argued that capping ground rents instead of an outright ban may be a more practical solution. Such a cap is likely to face less resistance on human rights grounds compared to a ban on existing leases.

“A phased cap and eventual ban or ‘sunset’ clause would provide time for the market to adjust. The reaction of freeholders to these leasehold reforms and the changes in valuation under the Leasehold and Freehold Reform Act 2024 remains uncertain. We will need to see how the new compensation rates under this Act are set before fully assessing their impact.”



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