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Mon, 6 April 2020

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The Government must make good on its promises to better protect leaseholders against unfair terms

The Government must make good on its promises to better protect leaseholders against unfair terms
3 min read

Leaseholders are too often viewed as sources of profit rather than homeowners – we must ensure protective proposals are swift and wide-ranging


In 2018 and 2019 the Housing, Communities and Local Government Committee investigated calls for reform of the leasehold sector. We found a system which stacked the odds in the favour of developers, freeholders and managing agents, leaving leaseholders with all the financial responsibilities and without matching safeguards to protect them. Leaseholders were too often treated not as homeowners or customers, but as a source of steady profit.

We received hundreds of written submissions from leaseholders who wanted to tell us about their onerous and escalating ground rents, high service charges and one-off bills, unfair permission charges, alleged mis-selling of leasehold properties by developers, imbalanced dispute mechanisms, inadequate advice services, and unreasonable costs to enfranchise or extend leases.

As our inquiry progressed it became clear that, for too many leaseholders, the dream of buying their first home had become a living nightmare. The scale of concern in the sector was truly staggering.

Worse still, in some cases it appeared that the reality of the terms that customers were signing up to was deliberately hidden from them at point of sale. We called on the Consumer and Markets Authority (CMA) to undertake an investigation into mis-selling and, last year, they agreed. In February 2020, they published their initial findings and I was pleased to see that their analysis agreed with ours. The CMA has now announced plans to bring enforcement action against companies who have engaged in malpractice. I hope that those who have suffered wrongdoing will soon have the redress they deserve.

"The ongoing delay in the removal of dangerous cladding from existing buildings further illustrates the precarious position that leaseholders can find themselves in through no fault of their own”

Our inquiry found that commonhold is a system that works well in other countries but remains underutilised in England and Wales. Commonhold removes the need to renew leases and gives homeowners a greater role in deciding how their properties are managed. The Government should reconsider how they can provide greater support to enable this form of property ownership to become more commonplace.

In the December 2019 Queen’s Speech, the Government announced an intention to ‘reform unfair practices in the leasehold market’, remove ‘unnecessary ground rents on new leases’ and ‘give new rights to homeowners to challenge unfair practices’. These announcements are welcome, and I look forward to seeing the detail of what the Government proposes.

However, ensuring that the proposals also apply to existing properties will be critical.

A clear example of this will be the Government’s approach to onerous ground rents. We found that it was within government’s power to restrict existing ground rents and we proposed a limit of 0.1% of the property value, up to a maximum of £250 per year. I would urge the Government to introduce these safeguards to those already affected by onerous and unfair terms.

The ongoing delay in the removal of dangerous cladding from existing buildings further illustrates the precarious position that leaseholders can find themselves in through no fault of their own. We have seen numerous cases of homeowners facing bills of tens of thousands of pounds to resolve issues that were not of their making. This is having a serious impact on the lives of too many people and the Government must urgently look again at how it can fund and accelerate the pace of remediation. I expect the new Committee to continue to closely scrutinise the Government’s approach to these issues.

 

Clive Betts is Labour MP for Sheffield South East and chair of the Housing, Communities and Local Government Select Committee

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