Following on from the announcement of a sector “Pledge for leaseholders” by Secretary of State James Brokenshire on 28th March 2019 the Chair of the Communities Select Committee, Clive Betts MP, has been quick to respond.
Chair Betts welcomed the government’s work but strongly cautioned against the pledge in a letter sent to the Secretary of State:
“It is disappointing that the Government has not yet taken a more vigorous approach to tackling the serious failures in the leasehold system. Despite the catalogue of problems highlighted in our report, they have chosen to trust the developers and freeholders who created these onerous leases in the first place to decide how to make the system fair. Given the evidence we heard from leaseholders during our inquiry, we know it will be difficult for them to trust developers and freeholders to deliver on such pledges anyway.
“The Government’s approach to ground rent is a particular concern. There is no inherent value to this system, which in the worst cases prevents leaseholders from renewing a mortgage or selling their home. This is not about doubling ground rent alone, and there are plenty of examples of RPI-based mechanisms having the same effect, particularly where ground rents increase above 0.1% of the value of a property. The Government should accept this and ensure that ground rents are capped at an affordable rate through legislation.
“We do, however, welcome that the Government has accepted our recommendation to prevent freeholders from recovering their legal costs through the service charge, even when they lose. This will go some way towards alleviating the risks to leaseholders in bringing service charge, or other, challenges to tribunal.”