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Government Is Steadfast On Reforming Leasehold Despite Resistance

(Alamy)

4 min read

The Leasehold and Freehold Reform Bill will receive its third reading on Tuesday and Government remains steadfast on its commitment to reform, vowing to strengthen the Bill despite backlash from some Tory MPs.

A leaseholder is a tenant who has paid to live in a property for a select period of time, and often includes apparent homeowners. Government data suggests long-term leaseholds usually last between 99-125 years.

Once the agreement ends, the property returns to the landlord, who owns the home and the plot of land. Government data suggests there are almost five million leasehold properties in England, which makes up 20 per cent of the current housing stock.

Key amendments to the Leasehold and Freehold Reform Bill which have been put forward by MPs from across the House include an end to forfeiture and providing leaseholders in flats with a share of the freehold.

Owning a share of the freehold on a leasehold flat allows the tenants to collectively have a stake in the freehold of a building. This in practice can allow tenants to extend their leases more cheaply.

Forfeiture is a way a landlord can evict their tenant if they break a part of the leasehold contract, which can include failing to pay ground rent. A new amendment put forward by Matthew Pennycook, Labour's shadow housing minister, could end this prospect. 

PoliticsHome understands the Government is confident the Bill will pass through Parliament, with the Bill receiving cross party support. One senior Tory MP, who has campaigned on reforming the leasehold sector, hoped the Bill would pass through the Commons easily, despite anticipated backlash from noted anti-leasehold reform MPs on the right of the party such as Geoffrey Clifton-Brown to protest. 

However there are some concerns within Government that the Leasehold and Freehold Reform Bill could face detailed amendments in the Lords which would significantly slow down the speed at which it is passed into law. PoliticsHome previously reported some housing campaigners had hoped it could be legislated for by as early as May.

Bob Blackman, Conservative MP for Harrow East, told PoliticsHome he was still concerned the Bill did not go “far enough” in promoting Commonhold, which allows residents in a block of flats or estate to own the freehold of their building, and removes the time limit which people can live in their accommodation for. This system is used in the United States, Australia and across Europe.

“I think the government has said [Leasehold] is too complicated essentially. So, it is a much simpler Bill than we would otherwise have wanted,” Blackman said.

“It's going to be a reform, which is good news. But it doesn't go far enough. And we should be looking at a second phase.”

Harry Scoffin, founder of Free Leaseholders, a campaign group set up to strengthen the Leasehold and Freehold Reform Bill, told PoliticsHome there was a “strong cross-party” support amongst voters to see the "feudal" leasehold system abolished.

“This Bill still has the potential to put leasehold on the pathway to extinction. To do this, the government must abolish forfeiture, a medieval tool used by freeholder landlords to extort money from hapless homeowners under the threat of them losing their home,” he said.

Campaigners have also expressed concern that the Bill will still allow developers to sell retirement blocks off as leasehold homes. 

The Guardian reported that clauses in the Bill will allow developers to sell homes as leasehold if they had already been granted permission. 

Gove in a recent interview with The Sun promised the new Leasehold and Freehold Bill would become law by the next general election.

The Levelling-up Secretary also told the paper he was “instinctively drawn” to setting ground rents to a “peppercorn rate”.

“I agree that if you've got a situation where people need some of that common work to be done in communal spaces, then service charges should be fair,” he said.

Ground rent is a payment made by the leaseholder to the freeholder for using their home and the land around it. A consultation on ground rents – which closed on 17 January – has been looking into ways to limit the charges which leaseholders pay.

A peppercorn rate is an industry term used to refer to a payment of no financial value. In practice, if ground rents were set to a peppercorn, the leaseholder would not pay any ground rent.

A DLUHC spokesperson said the Leasehold and Freehold Bill will make the biggest changes to leasehold for a generation and will “improve homeownership for millions across England and Wales”.

They added the Bill will deliver 990-year lease extensions, provide greater transparency for service charges and abolish marriage value.

“The Secretary of State has been clear that we are always looking for ways to improve the legislation and that the bill will make sure leasehold becomes a thing of the past over time,” they said.

Polling from Opinium has found 65 per cent of those intending to vote Conservative at the next election, and 62 per cent wanting to vote Labour want leasehold abolished.

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