08 Nov UK Government’s King’s Speech housing pledges on leaseholds and Renters Reform
Propertymark has stated the UK Government’s commitments to reform the ‘feudal’ leasehold system need to be fit for purpose. Propertymark has long argued that the leasehold system in England and Wales needs to be reformed, with the phasing out of leasehold tenure alongside the promotion of commonhold and other alternatives.
In the King’s Speech today, the Conservatives have committed themselves to ensuring that all new homes in England and Wales will have to be sold as freehold properties.
The King’s Speech is always read out annually in the Lords Chamber to commemorate the State Opening of Parliament and it sets out the UK Government’s legislative agenda.
Levelling Up Secretary Michael Gove intends to phase out the ‘feudal’ leasehold system in England and Wales.
Ministers also want to cap all ground rents on existing leasehold properties to a ‘peppercorn’ rate, as well as change the standard contract lease extension from 90 years to 990 years.
They also want to end the requirement for someone to have lived in a property for two years before they can propose an extension.
Freehold means that you own the property and the land it is built on for as long as you want. Leasehold means that you own the property for a set period but not the land it is built on.
Furthermore, the UK Government recently confirmed that it has agreed a pledge with five sector-leading insurance brokers, which could mean thousands of leaseholders in buildings with identified fire safety issues witness a substantial reduction in their insurance premiums.
They are also promising to have a cap of 15 per cent on the proportion of the premium that brokers take to compensate for their work in arranging the insurance. The Financial Conduct Authority (FCA) report on broker remuneration found that this amount can be as high as 60 per cent of the cost of the premium paid by leaseholders.
Also, the Renters Reform Bill will be carried over to the next Parliament, as confirmed in the King’s Speech. However, Section 21, which allows landlords to evict tenants on a shorthold tenancy, will not be scrapped until the court possession process is modernised and speeded up.
Timothy Douglas, Head of Policy and Campaigns at Propertymark, said:
“Many agents and leaseholders will be relieved to hear plans for new legislation to further reform the leasehold system. However, the UK Government must ensure any legislation to abolish leaseholds is fit for purpose.
“For example, there are no reports yet that have confirmed what impact capping ground rents will have on service charges, and it is important to consider that every development is individual, and some may still require aspects that justify specific service charges. As every development will likely have unique characteristics by design, there may well be a need for sensible provision and certain clauses/exemptions where an ongoing management fee might be appropriate. There may well be communal aspects of a development design where a management charge might still be relevant for the upkeep of an area for example.”
