Implementing reforms to the leasehold system in England

We submitted a consultation response to Government on making the leasehold market fairer. We argued legislation should prohibit the granting of new residential leases on houses. The Government should also restrict ground rents on new leases for houses and flats.

Summary of our response

We believe the government need to do more to implement the ban on unjustified new residential long leases being granted on non-exempt houses including:

The Government must ensure that developers no longer build on land when they do not own the freehold.

Several cases have emerged where developments have been built on leased land that is not owned by the housebuilder. The Government should ensure that these clauses are prohibited so leaseholders looking to purchase their freehold are not at a disadvantage. In our report ‘Leasehold: A Life Sentence’, many respondents came to issues where they came to purchase their freehold, but the developer had sold it on to a third party. By ensuring that leaseholders don’t build on land where they do not own the freehold, leaseholders will be able to more easily buy the freehold.

The Government should amend the Landlord and Tenant Act 1987 to extend the right of first refusal to houses.

The Government should amend the Landlord and Tenant Act 1987 and extend the right of first refusal to houses. Under the Landlord and Tenant Act 1987 leaseholders of flats have the right of first refusal, which means they are legally entitled to buy the freehold before it is sold. When the Act was introduced it only contained provisions for leasehold owners of flats, not houses because most houses at the time were sold under freehold.

The use of building leases should cease

Continued use of building leases will result in discrepancies of property valuation. We are concerned that by allowing the continuation of building leases, house buyers will pay significantly more on purchase for the privilege of buying the house on a freehold basis.

Providing redress for leaseholders

To provide appropriate redress for all, the Government must do three things:

1. Purchasers of new build homes should have access to an ombudsman scheme

Purchasers of new build homes should have access to an ombudsman scheme. Currently, consumers who buy a new home directly from a developer have no access to redress. Under the Government’s proposals to streamline redress provision in the housing market the Government should extend proposals to create a one ombudsman portal to include land and new homes within the remit of the ombudsman for private housing. This would ensure that leaseholders can raise complaints with the developer, managing agent or estate agent and issues can be advanced to the ombudsman. Including new build houses within the scope of an ombudsman scheme is the most effective way to do this.

2. Where there is no managing agent, freeholders must sign up to a redress scheme.

Freeholders of leasehold properties should all be required to sign up to a redress scheme. An absent freeholder can cause several problems for leaseholders in a building. The most common problems are the management of the building, the sale of a leasehold property and the need for a new lease or lease extension.

3. All new house builders must sign up to the Consumer Code for Home Builders

The Code covers every stage of the homebuyer process from pre-contract, exchange of contract and during occupation of the property. The Code covers a range of customer service requirements including clear and truthful advertising and marketing materials, contract information including termination rights and sufficient pre-purchase information to help consumers make an informed decision about their purchase. Where developers are not registered members of the Code, consumers have no guarantee of receiving minimum standards of customer service or redress.

Read our full response