We have campaigned for years for changes to the leasehold system and event fees on retirement homes. The issue of escalating ground rent on leasehold homes has been a long-term scandal that has left many owners trapped and unable to sell their houses.
Leasehold trap
Our report breaks ground on the leasehold scandal and sets out our robust recommendations to tackle the growing problem of life sentence leaseholds. As part of our campaign, we surveyed over 1,000 leaseholders to explore the extent of the scandal which has left thousands of Brits facing escalating ground rent, extortionate fees for making cosmetic alternations and the inability to sell their homes.
Since its release, our research has received coverage from many major news providers and has been quoted in Parliament during debates. It found that 62 per cent of respondents felt they were mis-sold their leasehold property and 93 per cent would not purchase another leasehold property.
Leasehold: A Life Sentence?
Thousands of homeowners are stuck in leasehold houses they cannot afford to continue living in and cannot sell. We surveyed over 1,000 people who bought a leasehold house to explore the extent of the scandal which has left thousands of Brits trapped in leases leases with third parties.
Event fees
Companies that own or manage specialist retirement properties, usually flats owned on a long leasehold basis, often include a clause in their lease agreements requiring owners to pay an “exit” or “transfer” fee when they wish to sell or rent out their homes.
With an aging population, these types of property will become more prevalent. When purchasing retirement housing, many developers will go through the fees with prospective buyers and many agents do the same with the lease. It is important that purchasers and their families realise that the longer they live in these types of property, the higher the charge is likely to be.
We have been supporting the Law Commission as they look to introduce stringent codes of practice to help bring event fees to the attention of prospective buyers. In March 2017, the Law Commission produced a report on event fees which included a draft code of practice protecting consumers by preventing them from being charged in unexpected circumstances. The code limits the circumstances in which event fees can be charged and, in some cases, the amount that can be charged.
Leasehold properties in Wales
We were a member of the Welsh Government’s Task and Finish Group set up to reform the leasehold sector. Its report which identified failings in the leasehold system was released in Juy 2019.
They put forward recommendations on code of practice, accreditation of agents, options available to freehold homeowners and how to improve education, training, and awareness. The report will advise the Minister on leasehold reform including the reform of practices carried out by property agents.
The leasehold sector is a big focus for us, and we’re pleased the Welsh Government is looking into it and taking action to help the country’s most vulnerable homeowners.
Leasehold is a complex area, and the group’s report, with 31 main recommendations, reflects this complexity. Nevertheless it remains a challenge that I am committed to addressing.
What are we calling for?
In our submission to the Housing, Communities and Local Government Committee we outlined our position on what is being done and what needs to be done in reforming leasehold.
The government must:
- Prevent the sale of new-build leasehold houses unless there is a legitimate reason, such as shared ownership with a staircasing lease.
- Prevent doubling of ground rents and ban ground rents where they increase above inflation for existing leaseholders.
- Set ground rents at zero on all newly established leases.
- Introduce legislation to exempt leaseholders from Ground 8 possessions claims.
- Make enfranchisement easier and simplify the process for lease extensions.
Further action:
- Legislate to ensure developers compensate consumers to remedy onerous clauses.
- Remove the requirement that leaseholders must own the lease on their house for two years before making a claim and ensure that developers do not build on land when they do not own the freehold to.
- Amend the Landlord and Tenant Act 1987 to extend the Right of First Refusal to houses and simplify Right to Manage.
- Introduce overarching statutory regulation of the property sector.
- Create a digital log-book for each property that is bought and sold.
Support existing leaseholders:
- Purchasers of new build homes should have access to an ombudsman scheme.
- All new house builders sign up to the Consumer Code for Home Builders.
- Where there is no managing agent, freeholders must sign up to a redress scheme.
- Implement a code of practice and disclosure document concerning event fees in specialist retirement developments as drafted by the Law Commission in March 2017.
Understanding Leasehold
Estate agents have a level of responsibility, and the Consumer Protection Regulations require agents to pass on all material information in respect of a lease. This comprehensive guide will help NAEA Propertymark members with best practice regarding leasehold properties.
Representing members
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Leasehold Reform Bill published
The Leasehold Reform (Ground Rent) Bill has been published today, and when implemented aims to help tackle inconsistency and ambiguity of ground rents for future leaseholders.