LKP guidance for responding to the government consultation on tackling unfair practices in the leasehold market

This article offers some tips on responding to the government consultation on “tackling unfair practices in the leasehold market”.

It gives you links to some of the documents you might want to read and gives an explanation of some of the questions asked in the consultation as well as highlighting some of the issues you may wish to consider.

Important documents some of which you may wish to read

• The main consultation paper on unfair practices in the leasehold market
  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/632108/Tackling_unfair_practices_in_the_leasehold_market.pdf
  
• The Housing White Paper published in February 2017
  ttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/590464/Fixing_our broken_housing_market_-_print_ready_version.pdf
  
• A copy of the House of Commons briefing paper
  researchbriefings.files.parliament.uk/documents/CBP-8047/CBP-8047.pdf
• A copy of the Leasehold and Commonhold Reform APPG preliminary report
  https://www.leaseholdknowledge.com/wp-content/uploads/2017/04/AllPartyParliamentaryGroupLeaseholdReportApril27.pdf

Respond to the consultation here:

The preferred option is online here:

https://www.surveymonkey.co.uk/r/leaseholdhouse

alternatively you can email your replies to:

LeaseholdHousesConsultation@communities.gsi.gov.uk

Or you can post to:

Leasehold and Rentcharges Team
Department for Communities and Local Government
Third Floor –Fry Building
2 Marsham Street
London
SW1P 4DF

 

IMPORTANT NOTE
It is very important that you give your own answers to the questions and do not copy and paste from someone else’s input.

If you do there is a danger that your submission will be classed as part of a “campaign” and that those responses will then be consolidated as a single reply.  DEFRA applied just this rule with their Water Bill consultation, counting the whole leasehold sectors input as one set of answers.

Other recommendations

• Avoid the temptation to write too much. There will be thousands of submissions. Be as succinct as you can so there is more chance that your response will be read carefully. If you submit via email or post the govenment will have your details so can ask further questions if relevant.
• Wherever possible comment by reference to factual informaiton rather than opinion.
• If you are responding as a private individual not all the questions will apply to your circumstances. So don’t feel you need to answer every question.
• The opportunity for your widest answers are in the last question, no 21. It asks you to suggest any further issues that the government should consider. They prompt with examples such as: different models of ownership e.g. commonhold; the regulation of managing agent’s; leasehold terms and enfranchisement.
• We have been contacted by some people to advise the survey can time out if you take too long. If your worried about this read all the questons in the consultation document first and prepare your answers before opening the survey. Alternatively email them in to the address detailed.

 

Notes on the Consultation Questions

Questions 1-4 are administrative and ask whether you are responding as an organisation or an individual. Most of you will of course be responding as private individuals.

Questions 5 onwards looks at the detail, but the same questions are asked whether you are an individual or an organisation.

Questions 5-8 relate to the limitation on the sale of leasehold houses. This is covered on pages 12-14 of the consultation.

You may want to refer to the White Paper for an explanation of the governments thinking on “estates” when answering some of the questions in this section.

The issue of which sites might be excluded from consideration in this section is potentially confusing. It’s perhaps best to assume that this section focuses on the option of leasehold and freehold rather than looking at the options considered later in the consultation where commonhold is put forward as a future option. In many other countries where the examples in 3.3 and 3.4 are covered they do not use the leasehold model.

Questions 9-12 relate to the Help to Buy scheme. This is covered on pages 14 and 15 of the consultation.

This section is self-explanatory and concerns those who have used the Help to Buy scheme.

Questions 13-18 relate to onerous ground rents. This is covered on pages 16-19 of the consultation.

As some of you will know a number of these questions have been covered in the LKP/APPG/Facebook survey.

Q13 needs a very brief answer setting out your lease terms. It might be useful if you set it out in the format: Starting ground rent £XXX increases via Doubling/RPI every X years.

Q17 provides an opportunity to express your view on what the government might do to support existing owners with onerous ground rents.  If you are aware that your ground rent terms may make it difficult or impossible to sell your home it would be worth mentioning this. Any retrospective action to limit ground rent terms is going to be difficult, but you may want to understand and comment on what has happened in places like Northern Ireland and Scotland where they have introduced fixed ground rent multiples for purchasing the freehold.

Q18 asks you to suggest options for some form of voluntary code to limit ground rents. We are unaware, in the whole history of leasehold, that such a code has ever been followed.

Question 19 relates to Ground 8 possession orders. This is covered on pages 20-21 of the consultation.
This is a highly technical matter that only lawyers are likely to have a view on. It concerns the technical possibility that high ground rents may give rise to a possession order in the event of the ground rent not being paid. If the government accepts this is a potential problem, it seems likely to act.  To our understanding, this issue has not been tested in the courts.

Questions 20 relates to estate charges for freehold houses. This is covered on pages 22-23 of the consultation.

It has long been understood that it is more difficult for an individual freehold house owner to challenge their estate service charges. The expertise in dealing with these types of issues sits with the Property Tribunal.  When reference if made to freeholder in this section they are talking only about the rights of individual house owners, not the rights of the freeholder of the estate. The same point arises here as it does in points 5-8 where the assumption in the question is that the freehold/leasehold model, rather than other ownership options, is being considered.

Question 21 relates to “future issues”. This is covered on page 24 of the consultation.

The government has recently moved Commonhold to DCLG housing department from the Ministry of Justice. This is so that it can now be reviewed as a housing issue.  It is accepted that the current version of commonhold legislation, introduced in 2002, is flawed. Government is now looking to understand how it might be made to work. You may wish to understand why commonhold could be a relevant model for your type of site and how it might impact your answeres to previous quesitons. For those not aware of Commonhold is referred to as Strata or Condominium in different parts of the world. Almost all countries except England and Wales now use this sort of ownership and have abandoned leasehold.

There is plenty to read about this on the LKP site or you might google the issuue or look at this article https://en.wikipedia.org/wiki/Strata_title

There are many other issues you may want to consider for Q21:

• The regulation of managing agents has been an outstanding issue for many years.
• The effective control of leaseholder funds/provision of accounts e.g the proposals in s152-156 of the 2002 Commonhold and Leasehold Reform Act have yet to be implemented.
• As regards the statutory right to buy the freehold when being sold on by the landlord, in the survey currently under way 44.5% of leaseholders advised that their freehold was sold on within the first two years, and 48.5% of leasehold flat owners advised that their freehold was sold on without them being offered their statutory right of first refusal.
• The issues raised in the Preliminary APPG report (see link to this document at the start of this article) raise a number of other issues you may wish to raise.
• Transfer/exit fees in retirment homes.

The following might also be noteworthy for comment regarding legal issues already consided but not yet implemented:

1 The Law Commision report on the forced termination of tenancies

This draft legislation proposes to end the draconian forfeiture powers that apply to leasheold homes, and replace it with fairer system.

https://www.lawcom.gov.uk/project/termination-of-tenancies-for-tenant-default/

2 The Law Commision reported on covenants and ways to make it more viable to create freehold estates with charges that can be passed on effectively to the individual freeholders living on those sites.

https://www.lawcom.gov.uk/project/easements-covenants-and-profits-a-prendre/