Unfair ground rents tackled in plans to regulate leasehold sector
The proposals focus on eight key areas and have been passed on to housing minister Alok Sharma for further consideration.
The sector has been the subject of significant criticism and scrutiny over the last year, particularly in the wake of terms that saw ground rents escalate at alarming rates.
This prompted a threat from communities secretary Sajid Javid to restrict Help to Buy on leasehold properties to where there were “acceptable terms” in place.
The eight key areas highlighted by the Legal Sector Group (LSG) responsible for the proposals are:
- Reasonable fees for administrative activities – covering a tariff of fees for quantifiable activities and the provision of standardised documents;
- Reasonable timescales for administrative activities – creating obligations for the lease administrator in terms registration and their provision of information within a certain timescale;
- Enforcement – with a mandatory requirement for all freehold management or leasehold administrators to be part of a redress scheme;
- Unfair lease terms – covering initial lease terms, rent review clause, escalating ground rents, and exit/event or transfer fees;
- Overhaul of tenure – covering a review of commonhold regulations and a simplification of the process to extend leases and convert to freehold;
- Building insurance – obligations for landlords and requirements for lease administrators to ‘shop around’;
- Management regulation – covering reserve funds on leasehold/freehold management block and costs of management charges;
- Marketing of leasehold properties – covering the provision of upfront information on remaining term of the lease, ground rent, annual service charge, rent review clauses, lease clauses, etc.
The LSG is comprised of The Conveyancing Association (CA), the Chartered Institute of Legal Executives (CILEx), Bold Legal Group (BLG) and The Society of Licensed Conveyancers (SLC).
Conveyancing Association director of delivery, Beth Rudolf, said: “The CA has long-campaigned for leasehold reform and we are now urging the powers that be to put in place a programme of change in order to provide both sellers and buyers of leasehold property with certainty, peace of mind, reasonable costs and a much greater degree of clarity in terms of what they are signing up to, and the responsibilities that are shared among those involved in their leasehold property.
“We are looking forward to working with the Law Commission and the new government in order to make these proposals a reality.”
Society of Licensed Conveyancers chairman, Simon Law, added: “The SLC has been advocating for many years that the serious shortcomings associated with leasehold title, and the process for buying and selling leasehold properties, are addressed for the benefit of homeowners.
“It is gratifying that the legal profession including solicitors, licensed conveyancers and Chartered Legal Executives have come together to arrive at a common set of proposals for both the Law Commission and the government to consider.”