APPG, April 26
Both the MHCLG civil service and the Law Commission are genuinely enthused to reform the leasehold sector and moving fast to do so, encouraged by the Communities Secretary.
This was the message of John Hall, director at the MHCLG, who was speaking on April 26 before the promotion of Sajid Javid to Home Secretary and the appointment to DHCLG of James Brokenshire.
The civil service were struck by the 6,000 responses to the consultation on leasehold reform launched in the summer.
Mr Hall pointed out that 46% of all new build registrations to the Land Registry in 2016 were leasehold, including 15% of all new build houses.
“We are working to protect new leaseholders, but not forgetting those who already own a home. Government wants to make sure that landlords do not obtain means to hold onto ground rents unfairly wriggling out of the changes that we are doing.”
A single code of practice to set minimum standards and improved dispute resolution are also being considered.
“These will make things easier for leaseholders to challenge the service charges that they have received, and also the switch agents.”
A working group is being set up of professionals across the sector “to take this work forward”.
I’m very grateful for all those who contributed this work so far including the leasehold knowledge partnership stop
The government is also going to make it easier to set up a recognised tenants association, about which it has taken counsel’s opinion and will issue a consultation response in the coming months.
A single ombudsman for the sector is also being considered and “right to manage legislation needs to function as intended and does not get frustrated by freeholders in the courts and tribunals”.
The department is also producing a leasehold guide to help inform the public of what to look out for when buying a home.
“The Secretary of State intends to bring forward legislation as soon as parliamentary time allows.
“There’s a real sense of personal urgency to make this agenda work. We very much hope that members of the APPG will play an active role in developing this with us and provide their input into the policy-making process.”
A copy of Johns full speech can be read below:
John Hall Speech to the APPG for Leasehold and Common-hold
April 26 2018; Word Count: 1203 with headings
1. Firstly, can I say thank you for the invitation to speak to you all. As a Director in the Ministry of Housing, I tend to talk to a lot of groups – but a chance to discuss what we’re doing with the APPG is a privilege.
2. Because the work that you do – and the experiences you have – ensure Ministers can make properly informed decisions as we seek to change leasehold for the better.
3. I’d like to share a story before we begin. As you may know, our leasehold team in the Ministry of Housing is growing. I was talking to one of our new recruits the other day and he told me it was the Westminster Hall debate last December that persuaded him to join us.
4. He read the contributions from the people in this room and thought – “This is an issue I can make a difference on.”
5. So thanks for helping me to fix my staffing issues, too! It really does help.
6. So – a brief recap.
7. In June last year, the department published a consultation. We wanted to know what people felt was wrong with the system, and how they thought it should change.
8. We received over 6,000 responses, mainly from individual leaseholders who told us the system was broken.
9. The Secretary of State is committed to acting on their concerns. So the Government is going to:
a. One: ban new build leasehold houses, where there is not an exceptional reason for them.
b. Two: reduce ground rents to a ‘peppercorn’ rate. This will prevent freeholders from charging onerous ground rents, such as those which double every ten years.
c. Three: work with the Law Commission on reforms to help existing leaseholders. This includes improvements to the enfranchisement process, making the process of extending a lease or purchasing a freehold easier, quicker and more transparent, and exploring how Commonhold could be reinvigorated in England.
d. Four: ensure leaseholders and those who pay Rentcharges cannot be unfairly served possession orders for falling into arrears; and ensure freeholders who pay service charges have the same rights as leaseholders to challenge them.
10. So, what have we been up to since the December announcement?
Acting decisively and promoting reform early
11. As I said, the Secretary of State is committed to acting decisively on leasehold and taking actions to improve the situation even before legislation.
12. For example, on the same day as his announcement in December he wrote to housing developers. This letter outlined his expectation that the Help to Buy loan would not be used to fund leasehold houses.
13. He has also been clear that compensation schemes should be introduced for people who have onerous ground rents. A number of developers introduce these and allow tenants to sign deeds of variation to their existing leases.
14. But the Secretary of State has also made clear that this action must go further, faster and extend to second hand buyers.
15. The department is actively monitoring progress against this expectation. A number of policies remain under review should it not be met.
Work is underway
16. Behind the scenes, work is underway on the policies that will underpin leasehold reform.
17. We are developing plans on how the Government’s commitments to restrict ground rents to zero and ban new build leasehold houses will work in practice.
18. This is a complex area. Land Registry report the 46% of new-build registrations were leasehold in 2016 and that 15% of new-build houses were sold as leasehold in 2016. It’s important that any impact on housing supply is mitigated and we’re confident that, with your help, we can get it right.
19. So we’re working to protect new leaseholders, but not forgetting those who already own their home. For one, Government want to make sure that landlords do not find alternative ways of reclaiming ground rents unfairly.
20. On April 1st, the Government announced plans to regulate managing agents; professionalise the sector and introduce a single mandatory code of practice to set minimum standards around transparency, communication, service charges and dispute resolution.
21. This will make it easier for leaseholders to challenge the service charges they receive and also to switch agents. In the near future, a working group made up of professionals across the sector will be set up to take this work forward.
22. Service charges are only one aspect where people demand value for money. The Landlord and Tenant Act 1985 was originally designed to ensure landlords consulted tenants before committing large amounts of their money to regeneration.
23. But this is an area where things are not working as they should. So last year we set up a technical group to assess options. We’re now considering how we can go further to make this provision fit for purpose. We’re grateful to those who have contributed so far, including Leasehold Knowledge Partnership.
24. The Government is also going to make it easier to set up Recognised Tenant’s Associations. The Department has now received advice from Counsel; agreed its approach and will lay regulations and publish its consultation response in the coming months.
Helping Existing Leaseholders
25. So those are a few areas where we’re making changes to make sure leaseholders are treated fairly. But better support is also needed for when things go wrong. The department is consulting on a Single Housing Ombudsman to see if this is a viable way to provide an integrated route to redress. We’re also keen to make sure Right to Manage Legislation functions as intended and does not get frustrated by freeholders in the courts and tribunals.
26. Of course, each of these changes each need the right independent, impartial and expert advice to work.
27. That’s why we are looking at the support and advice currently available to leaseholders though our arms-length body LEASE to ensure it properly reflects the evolving legislative and regulatory landscape. I know that the Chairs of this APPG have been involved in that work and it is now reaching its conclusion.
28. The department is also producing its own consumer advice – including a ‘how to lease’ guide. This will help inform the public on what to look out for when buying their home.
29. I hope this gives you a flavour of the actions we have been taking to support leaseholders. Moving forward, we are continuing to work closely with the Law Commission on their residential and leasehold reform programme. If I mention this only briefly it is only because I wanted to focus on the core work of the department and haven’t the time to list the sheer amount they are doing and which we are incredibly grateful for.
30. The Secretary of State has already announced he wishes to bring forward legislation as soon as Parliamentary time allows. We very much hope that members of the APPG will play an active role in developing this with us and provide their input to the policy making process.
31. Thank you to the Chairs of the APPG, who I know have already been involved, and who I hope will continue to work with my team as we bring about these changes.
All very well, but I notice there is nothing on addressing doubling ground rents for existing leaseholders especially in flats. If nothing substantive is planned over the short to medium term it would be good to know. From where I stand, my developer, who upon completion sold on the freehold to a speculator, has no intention of compensating leaseholders and all I’ve had from the developer and new landlord is “sue your solicitors nothing to do with us we acted lawfully and by the way the government’s action only applies to houses. Meanwhile my £400k flat is effectively worthless. All I want is some clarity, if no legislation is going to address this then I need to bite the bullet and sue my solicitor as my only option, I would buy the freehold or pay for a lease variation but in a 170 flat development doing that on my own is currently nigh on impossible. I suspect many thousands of leaseholders in Tower Hamlets where I bought are in the same position, and our developers as far as I’m aware, are doing nothing. I experienced nothing but arrogance bordering on ridicule when I contacted them. The idea that the majority of developers would ever take voluntary action suffer any pangs of guilt or even fear reputational damage as envisaged by the government when the scandal broke was always pie in the sky. For all the fire and fury and brilliant work done by the LKP, APPG and the Leasehold Campaign thousands of leaseholders like me are up a creek without a paddle and when corrupt managing agents are thrown into the mix it’s worse than that. I’ve made the biggest mistake of my life and have no expectation that it will be sorted in my time although hopefully leasehold will be abolished for future generations.
Like you Gary , we who live in St Richards Lodge, Chichester are subject to appalling increases in Ground Rent.. For my one bedroom flat in this pleasant city I presently pay £655.86 per annum which LKP has designated as ‘extremely high’ more like the amount charged for such a property in Central London, than a quiet town on the South Coast My neighbour with his two bedroomed flat pays £715.00pa.. We are subject to ‘review’ every seven
years based on the RPI; so in five years time another load will be whacked on – unless the law has brought some justice to this appalling situation. Needless to say re-sale confirms that this is a dwindling asset. We asked for an appointment with the CEO of the Developer Churchill Retirement Living Spencer McCarthy in order to discuss how they justify these charges. (Their subsidiary Millstream Management manages the property). However we were told (brusquely) that there was no point in discussion as no adjustment would be made.
Apart from the frustration of being rudely treated as a lesser being this is not the way I planned to spend my retirement. It is far from the “peace and security” promulgated by Churchill in their advertising.
The Developer, Churchill Retirement Living, has the son of John McCarthy from McCarthy & Stone, Mr Spencer McCarthy as Head.
Churchill’s subsidiary Millstream Management would say there was no point in discussion as no adjustment would be made, this is typical of these organisations once they have you money and all you have is a lease.
So sorry to hear about your traumas!
My late father bought a McCarthy & Stone retirement flat (from the same family stable as Churchill). We, too, felt misled by what was offered, and will never buy leasehold again.
I have made two complaints to the Advertising Standards Authority about what I consider to be misleading advertising, but both were rejected. One of the grounds given by the ASA was that they have “very few” complaints. This may be true – but it’s not a reason to reject.
Perhaps you might like to consider making your own complaint to them? Any pressure we can bring, from any direction, can only be helpful to the campaign for reform.
I have made a complaint to the ASA about M&S calling their residents Homeowners..several times on their website adverts.
The ASA have agreed to consider my complaint.
Awful to read about these cases, particularly where lessees are trapped in unsaleable properties.
Surely the principles of ‘Product Liability’ must be extended to leases, as it has been in other consumer contracts? Law academics argue that the principles of ‘Rescission of Contract’ could be extended to cover the worst lease cases. With housing, lack of funding for test cases seems always to be the bugbear. Householders of one or two-bedroom flats can hardly be expected to conduct legal experiments in the Supreme Court. The legal principles are already there, these academics write. Will Parliament apply them through legislation?
Fair and full MONEY BACK for trapped lessees should be the aim, surely, if either the developer’s building OR its lease contract is defective?
The idea that the consumer’s solicitor can be sued looks like a red herring. The whole LAW SOCIETY, though, could be blamed, for its inadequate ‘Standard Contracts of Sale’ and for not taking proper responsibility for the conduct of housing transactions as a whole to consumers.
Mr John Hall on point 17 said :
” 17. We are developing plans on how the Government’s commitments to restrict ground rents to zero and ban new build leasehold houses will work in practice.”
I propose Government’s commitment should be a global response which includes restricting ground rents to zero for leasehold flats and removing all ” hidden support” given to freehold companies.
1. “Removing hidden support” can be started tomorrow and can include :
2. ” Withdrawing the proceedings for forfeiture of lease in the L&T legislation for arrears of ground rent exceeding £350 by Housing Minister.”. The recovery of ground rent arrears can be made in the existing Small Claims Court ( which operates under the County Court..
3. ” Withdrawing “loan interest” as an allowable expense item against ground rent income. by HMRC ”
4. ” Applying 40% tax rate on all ground rent income colleced by freehold companies.to balance with 40% tax rate paid by leaseholders on job income… This tax rate to apply from 6 Apr 2019.” by HMRC.
Mr Hall should be gathering information on the counterparts to RTM Company in E&W viz
the “Community of Owners” operates for a block of flats in Spain and
the “Body Corporate” operates for a block of flats in Australia and New Zealand .
As leaseholder I am baffled that I have to pay a freeholder whose property was built 100 years ago but has no obligation on maintain it.