The problems with leasehold

The current government was elected on a manifesto commitment to reform and modernise the home-buying process to make it more efficient and less costly. It also promised to crack down on unfair practices in leasehold and, as most governments do, increase the number of homes built.

Since then there has been a flurry of announcements and speeches. Most notably, in late June the then communities secretary James Brokenshire unveiled the latest moves to sort out what is widely called the ‘scandal’ of leasehold properties. This is after months of headlines about escalating ground rents and significant charges to make everyday alterations, such as installing double-glazing and replacing flooring.

This is against the background of a survey last year by the National Association of Estate Agents which found that 62% of people felt they were mis-sold their leasehold and 93% wouldn’t purchase another leasehold property.

Some 60 freeholders and developers have since signed up to a public pledge to “crack down on toxic leasehold deals”, while in May, the Competition and Markets Authority announced it would investigate whether leasehold properties have been mis-sold.

So the government has stepped up its efforts, with Mr Brokenshire announcing that it will reduce ground rents for new leases to zero. Having already committed to bringing forward legislation to prohibit new residential long leases from being granted on houses, whether new-build or on existing freehold properties, he has also instructed Homes England to renegotiate Help to Buy contracts to explicitly rule out selling new leasehold houses, other than in exceptional circumstances.

And where buyers are incorrectly sold a leasehold home, consumers will be able to get their freehold outright at no extra cost.

Further, to stop freeholders and managing agents taking as long as they want – and charging what they want – to provide leaseholders with the vital information they need to sell their home, ministers will introduce a new time limit of 15 working days and a maximum fee of £200. This should make the home-buying process quicker, easier and cheaper. The government is looking to create a New Homes Ombudsman as well, to protect the rights of homebuyers and hold developers to account.

At the same time, groups working with the government department have been working on plans to trial reservation agreements, improve the way information is collected and shared by estate agents and conveyancers, and examine the introduction of property agent (estate agent) regulation.

Property is an issue that matters to voters and Labour is touting its own plans to reform leasehold, arguing that the many government announcements made since 2010 have not borne fruit. It plans an immediate ban on leasehold houses, caps on ground rents for existing leaseholders, a new, cheaper formula to buy freeholds, and new rights to challenge unfair fees and poor service.

Labour says that, in the longer term, its ambition is to move away from leasehold for good, so in government Labour would legislate within the course of its first parliament to ban the building of new private leasehold flats as well as houses. It would accompany this with reforms to commonhold – a newer system of ownership for flats where every resident owns a share of the block – to make that work better too.

The wider context here is the government’s target of building 300,000 new homes a year by the mid-2020s. But, encouragingly, it is not just about short-termism. In a recent speech, Theresa May said that “for too long we have allowed ourselves to think there must be a trade-off between quality and quantity” in house building – that raising one means reducing the other.

But this need not be the case, and the government-commissioned Building Better, Building Beautiful Commission recently published its interim findings on how to embed “beautiful, sustainable and human-scale design” into the planning and development process. The report says: “Beauty and place making should be a collective ambition for how we move forward and a legitimate outcome of the planning system.”

The flurry of activity shows how vital housing policy is. The reality is that there is no magic solution – Mrs May said it required “concerted action on many fronts – a thousand small changes that, when taken together, bring about the revolution we want and need to see”. This has to be right.

We don’t yet know what Boris Johnson’s view will be, but we think it unlikely that he will row back on the progress made to date.

The new housing, communities and local government secretary, Robert Jenrick, who replaced James Brokenshire is a relative unknown. However, he has echoed his support for home ownership saying at last year’s Conservative Party conference, that if the government doesn’t revive home ownership the Conservatives “will lose the next general election.”

Conveyancers are often at the blunt end of the problems the politicians are trying to fix – sorting out a hopeful seller’s leasehold problems or using new technology to speed up the process and keep clients better informed.

But it is heartening to see their commitment to high-quality customer service – embracing new rules on being more transparent about the price and quality of the services they offer – and how start-up technology providers are looking to work with them to make the home-buying process much simpler than now.

Regulation also plays a major role in ensuring that we do not go too far in the wrong direction, and the CLC is playing a full part in supporting innovation that protects the consumer and makes the process of buying or leasing a home far less stressful and complicated than it is today.

Stephen Ward is director of strategy at the Council for Licensed Conveyancers. For more information, please visit: https://www.clc-uk.org/consumers/