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Changing landscapes in residential leasehold

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Laura Bushaway, Knowledge Development Lawyer

2020

October

September

  1. Draft Code of Practice for Regulation of Property Agents

    Closure of consultation on the draft code of practice.

August

  1. Government publishes response to First Homes Consultation

    The MHCLG recommends the introduction of a scheme which offers properties for sale with a 30% discount from the market value to people living locally who are first time buyers or key workers.  The Government's response proposes:

    • to give Local Planning Authorities powers to require a higher minimum discount of 40% to 50% provided there is evidence of a need for and viability of homes at a higher discount;
    • price caps after the discount has been applied of £250,000 in England and £420,000 in London, subject to Local Planning Authority powers to set a lower price cap in certain circumstances; and
    • eligibility criteria including income caps for applicants and restrictions on re-sale of properties within the scheme.

July

  1. Law Commission publishes reports on Enfranchisement, Right to Manage and Commonhold

    The Law Commission publishes its reports on Enfranchisement, Right to Manage and Commonhold proposing some fundamental changes to the residential leasehold sector including recommending commonhold to replace leasehold and overhauling the Enfranchisement and Right to Manage processes.

    Essential Reading: Our Insight
  2. New consultation on Fire Safety

    The Home Office publishes a consultation on Fire Safety to strengthen the Regulatory Reform (Fire Safety) Order 2005 and implement the Grenfell Tower Inquiry Phase 1 report recommendations.

  3. Government publishes draft Building Safety Bill

    The Government has described the draft Bill as bringing forward “the biggest improvements to building safety in nearly 40 years”.

    Essential Reading: Our Insight
  4. Draft Code of Practice for Regulation of Property Agents is published

    A draft overarching Code of Practice for the regulation of property agents is published upon which The Royal Institute of Chartered Surveyors and The Property Ombudsmen are consulting.  The Regulation of Property Agents (RoPA) Steering Group will review responses after closure of the consultation on 4 September 2020.

    Essential Reading: Our Insight
  5. Government publishes estimates of the number of leasehold dwellings in England

    The MHCLG has published a report estimating the number of leasehold dwellings in England in 2018/2019.  The report estimates that there were 4.5 million leasehold dwellings in England representing about 19% of housing stock in England.

May

April

  1. Government publishes response to Building safety Consultation

    The headline announcements from the Government’s response are:

    • a new national building safety regulator within the Health and Safety Executive will be established;
    • each building will have an accountable person (usually the owner or landlord receiving service charges) responsible for understanding and managing fire and structural risks and a building safety manager to perform those functions on a day to day basis;
    • new rights for residents to obtain safety information and new rules requiring residents to co-operate with the building safety manager;
    • for each building to have a golden thread of building information related to fire and structural safety to be held digitally; and
    • existing residential buildings above 18 metres will be subject to the new regime once they are occupied and there will be a transitional period for compliance, further  details of which will be provided by the Government during 2020.
    Essential Reading: Our Insight

March

  1. The Fire Safety Bill

    The Government introduces the Fire Safety Bill into Parliament to bring multi-occupied residential premises into the scope of the Regulatory Reform (Fire Safety) Order 2005. 

    Essential Reading: Our Insight
  2. Funding for replacement of non-ACM cladding on high-rise residential buildings

    The Government announces a £1 billion fund in 2020 to 2021 for the removal and replacement of unsafe non-aluminium composite material cladding systems (including high-pressure laminate, wood and other class C/D cladding) from high-rise residential buildings in both the private and social housing sectors.

  3. Housing Ombudsman and revised scheme

    The Housing Ombudsman publishes a revised Scheme giving stronger powers in relation to housing redress.  The Scheme will take effect from 1 July 2020 and will include:

    • a new power that allows the Ombudsman to issue complaint handling failure orders where complaints are not properly dealt with by landlords;
    • the ability to make a severe maladministration finding and a requirement for a landlord to demonstrate learning after a decision of the Ombudsman; and
    • developing a new complaint handling code.

February

  1. Competition and Markets Authority: update report

    The Competition and Markets Authority (“the CMA”) publishes an updated report on their investigation into whether there have been breaches of consumer protection law in the residential leasehold housing sector and the next steps, including future enforcement action by the CMA and the areas where the CMA considers that the law needs to change in the future.

    The CMA raises concerns in relation to:

    • lease terms under which ground rents may initially be high and increase significantly over time doubling more frequently than every 20 years.  The CMA estimates that there are around 13,000 leases with ground rents doubling more than every 20 years;
    • high or escalating ground rents which could result in the lease becoming an assured tenancy under the Housing Act 1988 which may diminish security of tenure.  The CMA estimates that there are around 57,000 homes where levels of ground rent exceed the threshold for an assured tenancy;
    • increases in ground rent linked to the Retail Price Index;
    • complaints about the mis-selling of leasehold houses;
    • complaints about high permission fees and service charges.  The CMA intend to publish information to assist homeowners to understand their rights and responsibilities;
    • checks and balances.  The CMA intends to work with the Government to introduce a clear statement when a property is advertised for sale of whether it is freehold or leasehold (including the remaining term of the lease) and an estimate of the annual costs of owning that property;

    The CMA announces it will be taking enforcement action in relation to certain instances of mis-selling of leasehold property and to address high and escalating ground rents.  Its investigation continues.

  2. New Homes Ombudsman and Consultation response

    The MHCLG publishes its response to the consultation: Redress for Purchasers of New Build Homes and the New Homes Ombudsman.  It announces that the Government intends to introduce new legislation obliging developers of new build homes to belong to the New Homes Ombudsman and to implement a code of practice for developers building and selling new build homes.

  3. Leasehold high-rise flats: who pays for the safety work?

    A House of Commons Briefing Paper: Leasehold high-rise flats: who pays for fire safety work is published.  The paper considers progress in implementing remediation works and issues raised by landlords and residents.

  4. First Homes Consultation

    The MHCLG launches a consultation: First Homes.  The consultation proposes the introduction of a scheme which offers properties for sale with a 30% discount from market value to people living locally who are first time buyers or key workers.

January

  1. Law Commission report on Enfranchisement valuation

    The Law Commission publishes its report on options to reduce the price payable on enfranchisement.  The report proposes three alternative schemes of valuation and a menu of sub-proposals which can be added to any of the three valuation schemes for the Government to consider.  It concludes that whichever final valuation method is selected must sufficiently compensate a landlord for interference with its property rights.

    Essential Reading: Our Insight

2019

December

  1. New Building Safety Bill and Fire Safety Bill announced

    In the background briefing to the Queen’s Speech, the Building Safety Bill and Fire Safety Bill are announced to put in place new regulatory regimes for building safety and extend the Fire Safety Order to building owners and managers of multi-occupied residential premises of any height.  The Bills are not published in draft form.

  2. New voluntary valuation process for high-rise residential buildings

    The Royal Institute of Chartered Surveyors, the Building Societies Association and UK Finance agree a new industry-wide voluntary valuation process in relation to buildings above 18 metres.  The External Wall Fire Review Process requires a fire safety assessment to be carried out by a suitably qualified person and is valid for five years.  

October

  1. Grenfell Tower Inquiry Phase 1 Report

    Grenfell Tower Inquiry publishes Phase 1 report dealing with the events of 14 June 2017.

    The Phase 1 report makes a finding at paragraph 2.16 that it was not the original intention “to include in Phase 1 of the Inquiry and investigation into the extent to which the building complied with the requirements of the Building Regulations.  However…..there was compelling evidence that the external walls of the building failed to comply with Requirement B4(1) of Schedule 1 to the Building Regulations 2010, in that they did not adequately resist the spread of fire having regard to the height, use and position of the building.”

    A number of recommendations are made in the report to introduce new legislation to require owners and managers of high-rise residential buildings to provide specific information and documentation to local fire and rescue services and to inspect fire doors to ensure they comply with applicable legislative standards.  In addition, owners/managers of all residential buildings (not limited to high-rise buildings) to provide fire safety instructions for all occupants in the building. 

September

August

  1. Government proposes new model for shared ownership

    The MHCLG publishes a discussion paper on making home ownership affordable which proposes to introduce a simplified model for shared ownership of residential properties. 

    The main proposals are the introduction of a new national simplified model for shared ownership, permitting increases of shares by 1% or more (currently the minimum incremental increase is 10%) and the removal of pre-emption clauses allowing landlords an exclusive right to market the property for eight weeks.

July

  1. Recommendations on the regulation of property agents

    The working group on Regulation of Property Agents publishes its report. The main recommendations are:

    • to regulate property agents by creating an independent regulator and introducing mandatory qualifications and a code of practice;
    • regulation to cover estate agents in the UK and letting and managing agents in England together with auctioneers, property guardian providers and online agents but not online portals;
    • introduce a mandatory licensing scheme overseen by the regulator; and
    • establish a new public body to undertake the role of regulator.
    Essential Reading: Our Insight
  2. Government response to Leasehold Reform report

    The Government publishes its response to the Housing, Communities and Local Government Select Committee Report on Leasehold Reform.

    The Government confirms in its response that it agrees the following recommendations of the Committee:

    • give clearer information to consumers on how to buy and sell leasehold properties;
    • supports the increased use of commonhold which the Government will consider further when the Law Commission’s Report on commonhold is published;
    • introduce a standardised “key features” document to assist consumers with the details of the lease before a purchase;
    • future ground rents to be capped at no financial value;
    • explore changes to the legislation surrounding legal costs;
    • seek proposals from the Law Commission on changing the law of forfeiture; and
    • require all freeholders of leasehold properties to be a member of a redress scheme.
    Essential Reading: Our Insight

June

  1. Building Safety Consultation launches

    The MHCLG publishes a consultation: Building a safer future: proposals for reform of the building safety regulatory system.  The proposals include a new regime for residential buildings over 18 metres and the introduction of the concept of a “golden thread” of information on the structure of the building and changes made to it to be held digitally and updated throughout the life cycle of the building.  In addition, new concepts of “dutyholders” and “accountable persons” to have clear responsibilities (to be defined in legislation following the consultation).

    Essential Reading: Our Insight

May

April

March

  1. New industry pledge on ground rents

    The MCHLG announces 40 developers, agents and landlords have signed up to an industry pledge agreeing not to include a clause in any new lease for ground rent to double more frequently than every 20 years and to identify and amend any existing leases within their portfolios where those clauses are present and include a link ground rent increase to RPI.

  2. New report published on Leasehold Reform

    The Housing, Communities and Local Government Select Committee publishes its report following its inquiry into leasehold reform.

    The headline recommendations made by the Committee include:

    • a proposal for commonhold to become the main ownership model for flats in England and Wales;
    • for the Competition and Markets Authority to investigate mis-selling in the leasehold sector;
    • to introduce a standardised key features document as part of a sales process identifying the tenure, the length of lease, ground rent etc;
    • to ban financial incentives for buyers to use a Solicitor selected by a developer;
    • to introduce legislation to remove onerous ground rents in existing leases and for ground rents in new leases to be a peppercorn;
    • to restrict perceived onerous permission fees in existing leases;
    • to introduce a standardised service charge demand;
    • to introduce a new consultation process for leaseholders for major works in privately-owned buildings with a cap of £10,000 per leaseholder;
    • to prevent freeholders from recovering legal costs through service charge or any other means where a leaseholder has been successful in legal proceedings against a freeholder.

    Essential Reading: James Souter and Lauren Fraser - Is it the end of the road for residential leasehold? 

    Essential Reading: James Souter and Lauren Fraser - Abolishing residential leasehold could create more problems than it will solve

    Essential Reading: Our Insight

January

  1. Law Commission report on Right to Manage

    The Law Commission publishes a consultation Leasehold home ownership: exercising the right to manage.

    The Law Commission’s intention is to simplify the right to manage (“RTM”) process and to give power to the First-Tier Tribunal (Property Chamber) to waive procedural mistakes so that less claims to acquire the RTM fail. 

    In addition, it proposes to relax the current qualifying criteria so that buildings with more than 25% non-residential parts could qualify for the RTM and to establish clearer rules for the transfer of information between the landlord and the RTM Company in relation to management matters.

    It also proposes to permit an RTM Company to acquire the RTM over multiple buildings on an estate rather than, as is currently necessary, requiring a single RTM Company to acquire the RTM over a single building on an estate.  

  2. Government response on housing redress

    The Government publishes its response to Strengthening consumer redress in the housing market. Proposals include:

    • establishing a Housing Complaints Resolution Service as a single point of access for tenants, leaseholders of residential premises, purchasers of new build homes and users of residential property agents;
    • establishing a Redress Reform Working Group to develop proposals;
    • creating a New Homes Ombudsman for buyers of new build homes; and
    • requiring all private landlords to become members of a redress scheme.

2018

December

  1. Law Commission Consultation on Commonhold

    The Law Commission publishes a consultation paper:  Reinvigorating commonhold: the alternative to leasehold ownership.

    The Commonhold and Leasehold Reform Act 2002 introduced Commonhold as an alternative structure to leasehold.  It allows for the ownership of a freehold flat within a larger residential development without leases or third party freeholders and there is no forfeiture because the unit holders own their freehold. 

    The Law Commission’s proposals for commonhold include that it should be possible to convert to commonhold without the unanimous consent of leaseholders and that the threshold for conversion should be 50% or 80% of long leaseholders of the flats in the building.

November

  1. Considering the case for a Housing Court: call for evidence

    The MHCLG publishes Considering the case for a Housing Court: call for evidence to consider the experiences of private landlords in possession actions in the County Court, the experiences of Court and Tribunal users and views on the transfer of property cases from the Courts to the First-Tier Tribunal (Property Chamber) and vice-versa.

  2. New regulations for recognising Tenants’ Associations

    The Tenants’ Associations (Provisions Relating to Recognition and Provision of Information) (England) Regulations 2018 come into force with the aim of making it easier for tenants’ associations of residential properties in England to become legally recognised and to obtain information from landlords about other tenants who have a legal right to join a tenants’ association.  One of the main changes is to reduce the threshold for an association to be legally recognised so that it must be recognised where it represents at least 50% of the qualifying tenants.

    Essential Reading: Our Insight

October

  1. New Leasehold Reform Consultation

    The MHCLG publishes the Government’s consultation paper: Implementing reforms to the leasehold system in England: A consultation.

    The consultation provides more detail on the Government’s proposals to ban the sale of leasehold houses and to cap ground rents in new residential leases. The key points are:

    • a proposed ban on granting long leases of houses which will apply to any houses developed on freehold land at any time and on leasehold land acquired from 22 December 2017;
    • a proposed cap to ground rents on new residential long leases at £10 per annum;
    • a proposal to give freeholders the same rights as those currently held by leaseholders to challenge the reasonableness of service charges levied through a deed of covenant or an estate rent charge; and
    • landlords and managing agents to provide leasehold information in connection with a sale within a fixed period of time (to be determined) and with their fees to be capped at an amount to be determined.
    Essential Reading: Our Insight

September

  1. Law Commission opens Consultation on Enfranchisement

    The Law Commission publishes a consultation paper entitled: Leasehold home ownership: buying your freehold or extending your lease.

    The consultation makes a number of proposals to overhaul the procedure for the leasehold enfranchisement of houses and flats including:

    • introducing a single scheme for “residential units” rather than separate schemes for houses and flats;

    Lease Extension

    • abolishing the requirement to own the property for two years in order to qualify;


    Individual Acquisition of Freehold

    • the qualifications based on financial limits such as the low rent test and rateable values to be removed;
    • new qualifying criteria that if there is more than 25% non-residential use then the building will not qualify (as already exists for collective enfranchisement claims);

    Collective Enfranchisement

    • introducing a requirement for the freehold to be purchased by a company limited by guarantee on behalf of the participating leaseholders unless there are less than four units;
    • permit collective enfranchisement of an estate rather than single blocks.
    • no further claim can be made for five years once a collective enfranchisement has concluded;
    • new right for non-participating leaseholders to later purchase a share in the freehold company;

    Procedure & Valuation

    • single procedure for lease extensions, individual freehold purchase and collective freehold purchase with standard forms;
    • the Law Commission’s stated aim is to provide a better deal for leaseholders as consumers and the consultation paper sets out alternative valuation options to seek to reduce premiums.
    Essential Reading: Our Insight

July

  1. New Inquiry into Leasehold Reform

    The Housing, Communities and Local Government Select Committee launches an inquiry into leasehold reform.

June

  1. Government guidance on leasehold ownership

    The MHCLG publishes a How to lease guide for current and prospective leaseholders setting out the difference between leasehold and freehold property and the rights, obligations and implications of being a leaseholder.

April

  1. Government’s response to Consultation on the home buying and selling process

    The MHCLG publishes its response to the call for evidence on improving the home buying and selling process and announces that it intends to publish guides on “How to Buy” and “How to Sell” with the aim of ensuring customers are better informed of the home buying and selling process and to potentially limit fees for the provision of leasehold information and to standardise the leasehold information form.

  2. Government announces new code of practice for letting and managing agents

    The MHCLG publishes the Government’s response to the call for evidence on protecting consumers in the letting and managing agents market. The key proposals are:

    • to establish a code of practice for letting and managing agents governed by an independent regulator;
    • to require letting and managing agents to undertake mandatory qualifications in order to practice; and
    • to set up a working group to develop a regulatory regime.

March

February

2017

December

  1. Government’s response on tackling perceived unfair practices in the leasehold market

    The DCLG publishes the Government’s response to Tackling unfair practices in the leasehold market. The proposals include:

    • introducing legislation to ban new residential long leases for existing or new build houses (except in specific circumstances, to be defined);
    • introducing legislation restricting ground rents in new leases to a peppercorn;
    • introducing a right of first refusal for lessees of houses, as exists for leaseholders of flats;
    • addressing the perceived loophole in respect of Ground 8 of the Housing Act 1988 whereby a landlord may seek possession of a long lease under Section 8 (designed for short tenancies) without having to comply with the statutory requirements in order to forfeit a lease for non-payment of ground rent; and
    • introducing legislation so that freeholders who pay charges for the maintenance of communal areas and facilities have rights to challenge the reasonableness of service charges. 

October

  1. Government announces call for evidence on letting and managing agents

    The DCLG publishes a call for evidence on Protecting consumers in the letting and managing agent market seeking views on whether a new regulatory model is needed for agents in the leasehold and private rented sectors.

September

July

  1. Government publishes Consultation on tackling unfair practices in the leasehold market

    The DCLG publishes a consultation: Tackling unfair practices in the leasehold market. The proposals include:

    • banning the sale of new leasehold houses;
    • limiting the starting value and increase of ground rents on all new residential leases over 21 years;
    • updating Ground 8 of the Housing Act 1988 so that long leases over 21 years with an annual ground rent of over £1,000 in London and £250 outside of London cannot be an assured tenancy to close a perceived loophole whereby a landlord may seek possession of a long lease under Section 8 (designed for short tenancies) without having to comply with the statutory requirements in order to forfeit a lease for non-payment of ground rent.  Where a lease is forfeited, as opposed to where a possession order is made under Section 8, the tenant has a right to apply for relief from forfeiture; and 
    • providing freeholders of estates with equivalent rights to leaseholders to challenge the reasonableness of service charges via the First-Tier Tribunal (Property Chamber).
  2. Government publishes new Consultation on Residents’ Associations

    The DCLG publishes a consultation: Consultation on recognising residents’ associations, and their power to request information about tenants.

    The Government proposes to make it easier for a secretary of a tenants’ association to obtain contact information of qualifying tenants from a landlord to increase the likelihood of the association being formally recognised under Section 29 of the Landlord and Tenant Act 1985.

February

  1. Publication of Housing White Paper

    The then DCLG publishes a Housing White Paper: Fixing our broken housing market, commencing a consultation on changes to planning policy and legislation in relation to planning for housing, sustainable development and the environment.

    The paper details the Government’s intention to review the planning system, and the private rented market to, in the Government’s words, “make renting fairer” for tenants and the leasehold sector to “promote transparency and fairness” by reviewing ground rent structures and the sale of leasehold properties.

    Essential Reading: Our Insight
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