Levelling the playing field in the heavily rigged leasehold system

Alan Draper, Managing Director of Common Ground Estate & Property Management, attended last night’s All Party Parliamentary Group meeting for Commonhold and Leasehold Reform, where Housing Minister Rachel Maclean outlined the Government intentions as announced in the King’s Speech earlier that day.
“In my view, the biggest potential for levelling the playing field in the heavily rigged leasehold system is scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.”

“As it stands, leaseholders bear all legal costs in FTT hearings. As many large landlords and managing agents have their own legal departments, they are heavily incentivised to fight these cases irrespective of likely outcomes………. it’s just a license to extract further monies from leaseholders.”

“I remain sceptical. Assuming it gets Royal ascent (which I doubt), too often, I have seen changes to leasehold law that, on the face of it, benefit leaseholders. However, practical application is expensive and still heavily weighted in favour of landlords. The system needs to be outlawed and replaced with Commonhold, thereby bringing us in line with the rest of the world.”

In notes released following the King’s Speech, the government said the Leasehold and Freehold Reform Bill would empower leaseholders by:

• Making it cheaper and more accessible for existing leaseholders in houses and flats to extend their lease or buy their freehold – so that leaseholders pay less to gain security over the future of their home.
• Increasing the standard lease extension term from 90 to 990 years for both houses and flats, with ground rent reduced to £0. This will ensure that leaseholders can enjoy secure, ground rent-free ownership of their properties for years to come without the hassle and expense of future lease extensions.
• Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes – so that more leaseholders can exercise their right to the security of freehold ownership or a 990-year lease extension as soon as possible.
• Increasing the 25 percent ‘non-residential’ limit preventing leaseholders in buildings with a mixture of homes and other uses, such as shops and offices, from buying their freehold or taking over management of their buildings- – to allow leaseholders in buildings with up to 50 per cent non-residential floorspace to buy their freehold or take over its control.

In terms of Improving leaseholders’ consumer rights, the notes said that the bill will do this by:

• Making buying or selling a leasehold property quicker and more accessible by setting a maximum time and fee for providing information required to make a sale (such as building insurance or financial records) to a leaseholder by their freeholder (known as ‘landlords’).
• Requiring transparency over leaseholders’ service charges – so all leaseholders receive better transparency over the costs they are being charged by their freeholder or managing agent in a standardised comparable format and can scrutinise and better challenge them if they are unreasonable.
• Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees – to stop leaseholders being charged exorbitant, opaque commissions on top of their premiums.
• Extending access to “redress” schemes for leaseholders to challenge poor practice. We will require more freeholders to belong to a redress scheme so leaseholders can challenge them if needed.
• Scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.
• Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders – by extending equivalent rights to transparency over their estate charges, access to support via redress schemes, and to challenge the charges they pay by taking a case to a Tribunal, just like existing leaseholders.
• Building on the legislation brought forward by the Building Safety Act 2022, ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work – protecting leaseholders by extending the measures in the Building Safety Act 2022 to ensure it operates as intended.