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Graham Awards

TODAY'S OTHER NEWS

Huge leasehold shake-up for landlords and other owners

The government claims that millions of homeowners in England and Wales will be given greater rights, powers, and protections over their homes as part of the most significant reforms to the leasehold system for a generation.  

Housing Secretary Michael Gove says that the Leasehold and Freehold Reform Bill, introduced to Parliament this week, will make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges. The Bill will also rebalance the legal costs regime and remove barriers for leaseholders to challenge their landlords’ unreasonable charges at Tribunal. 

The new powers will also help more leaseholders take over the management of their property if they wish to, instead of being stuck with the freeholder’s management choice, and we will make this process cheaper for leaseholders.  

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The government will also bring forward further reforms which will extend access to redress schemes and make it easier and cheaper to get the information needed to sell a leasehold home. 

Gove says: “People work hard to own a home. But for far too long too many have been denied the full benefits of ownership through the unfair and outdated leasehold system. That’s why liberating leaseholders forms a vital part of the Government’s Long-Term Plan for Housing.

“So today marks a landmark moment for millions of leaseholders across the country, as we unveil laws to deliver significant new rights and protections, slash unfair costs and crack down on exploitation.

“The Bill addresses one of the longest-term challenges that the country faces - fairness in the housing market. The measures in the Bill will put the country on the right path for the future by addressing the historic imbalances between leaseholder and freeholder to give homeowners a fairer deal, greater protections, and more rights.”

He claims the Bill will strengthen existing, and introduce new, consumer rights for homeowners by: 

- Making it cheaper and easier for people to extend their lease or buy their freehold so leaseholders pay less to have more security in their home;

- Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats), so leaseholders can enjoy secure ownership without the hassle and expense of future lease extensions;

- Giving leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged;

- Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice;

- Making it cheaper for leaseholders to exercise their enfranchisement rights as they will no longer have to pay their freeholder’s costs when making a claim;

- Extending access to redress schemes for leaseholders to challenge poor practice. The Government will require freeholders, who manage their building directly, to belong to a redress scheme so leaseholders can challenge them if needed – managing agents are already required to belong to a scheme;

- Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee that for home buying and selling information;

- Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.   

The government will also give greater rights to those in mixed-use blocks of flats. Currently leaseholders in these buildings are barred from taking over the management of the site or buying its freehold if more than 25 per cent of its floor space is commercial – such as shops or offices on the ground floor. 

The government will now increase the floor space limit to 50 per cent, so that more leaseholders can access the Right to Manage or the right to a collective enfranchisement. 

It will also ‘level up’ the rights of residents of freehold estates by granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders and equivalent rights to transparency over their estate charges. 

 

The Bill will also rebalance the housing system for leaseholders by: 

- Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice that currently acts as a deterrent when leaseholders want to challenge their service charges;

- Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees;

- Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset; and

- Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can extend their lease or buy their freehold. 

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    This bill is a bit like the RRB - promises to make huge changes for the better but actually will deliver very little for most people!

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    The Bill, if enacted properly, should reduce costs for lease holders .

    Peter Why Do I Bother

    Two Magic words Robin, "Enacted Properly". Absolutely beyond any of the current shower residing either side of the house or in the Civil Service.

     
  • Fed Up Landlord

    If it does what it says on the tin, then making Freeloaders pay their own legals ( solicitors and valuation fees) is at a minimum 5k off the cost of a lease extension. Simplifying the calculation formula and getting rid of marriage value will halve the cost of the premium. And if ground rents are capped or reduced to a
    " peppercorn" that's another big slice of freeloafer pie gone as ground rent loss is part of the "compensation" paid by the leaseholder in the process.

    The freehold pirates will quote " human rights", wail and gnash their teeth and squeal like pigs who have their trough took away.

    The devils in the detail- but if it delivers flat prices will increase.

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    I'm not sure the savings are quite that big in a lot of cases.
    Not paying their legal and valuation costs would have saved me about £3000.
    Marriage value can be the big one although by now surely most leaseholders know not to let a lease drop below 80 years. I bought 2 of mine with 67 years on the lease but the prices certainly reflected it.
    Ground rents have only been an issue for some leaseholders. Mine are currently zero, zero, £10, £10 and £30.

    As far as I am concerned it's the service charges that are the biggest problem but I'm not enthusiastic about leaseholders self managing.

     
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    With Gove in charge, don’t hold your breath hoping things will improve.

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    There are some good ideas but some of them seem to be based on the idea that all leaseholders are
    a) rational, decent human beings
    b) financially equal
    C) have the same ideas about building management as their fellow leaseholders.

    I own 5 leasehold flats. Two are ex Council. The other 3 are in older buildings that have been converted to 4 or 6 flats.

    Building A had a really good local freeholder who has recently sold the freehold to an elderly chap who lives in London. It's been put with a local property management company and we are receiving various communications about works they would like us to pay for. Some of it is welcome, some of it totally unrequired. The flats are occupied by about 50/50 tenants and owner occupiers. Budgets and willingness to spend varies considerably from leaseholder to leaseholder. Self management isn't an option as the block also contains 4 shops.

    Building B has an appalling freeholder. Charges for paperwork are astronomical. Every barrier possible is put in the way of lease extension or building improvement. The leaseholders tried self managing a few years ago but failed miserably and have had a management company appointed. They charge a lot and achieve very little. They're especially keen on commissioning surveys for work they know will never be done so they can charge a percentage based fee for having the survey done on top of the cost of the survey. The woman in the ground floor flat has been removing the communal hallway lightbulbs for the entire 3 years since I bought my flat. The management company hasn't even had the initiative to install a tamper resistant light fitting. I reported water ingress from the chimney about 9 months ago and we haven't received quotes to consider yet. The flats are usually 50/50 tenants and owner occupiers. The above mentioned woman has a tendancy to be totally irrational and confrontational and has caused several tenants to leave.

    Building C is recently converted and has the additional layer of a Head Leaseholder. He was the developer and lives in London. His local maintenance chap will only look at problems on a Sunday (if he hasn't got anything else to do) as he doesn't get paid for looking at problems, only for fixing them (if they're within his skill set). We were told a proper local property management company would be taking over management back in April. We are paying the monthly management fee based on their charges but not actually benefitting from their services or access to local tradespeople. The Head Leaseholder tried getting one of us to take over the Head Lease. It would only cost us the legal fees. Why would any of us want the hassle? All 4 flats are tenanted, owned by 4 different landlords, 3 of which use different letting agents and I self manage. As a leaseholder I don't necessarily have contact details for anyone other than the Head Leaseholder, which makes it difficult to know anything about the ideas or position of anyone else connected to the building.

    So that's the reality of a lot of leasehold flats. No matter what the government dreams up in theory it has to work in practice. They've forgotten to factor in the irrational human element.
    Lack of communication between leaseholders really doesn't help. GDPR is used as an excuse not to facilitate communication between leaseholders.
    Property maintenance is a major issue especially when management companies are adding on a percentage of the cost as their fee.

    Not being liable for the freeholders legal fees is very welcome.
    The rest of the proposals need to be closely examined and it needs to be established how to make them suitable for all scenarios.
    A purpose built block of flats containing 100+ units is very different to a standard Victorian house converted to 4 flats.

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