Leasehold reform 'quietly crumbles'
Mar 26, 2024
Over the weekend, The Sunday Times reported that the Conservative manifesto pledge to restrict ground rents to a peppercorn has been 'quietly axed'. This pledge has been much championed by Michael Gove and leaseholders hoped it would be added to the Leasehold and Freehold Reform Bill.
The Leasehold and Freehold Reform Bill is being debated on 27 March 2024, for the first time in the House of Lords, which has historically been associated with vested interests related to property.
Linz Darlington, Founder of Homehold:"The decision not to pursue a ground rent cap of a peppercorn is a major concession which comes less than a year after Michael Gove was forced to roll back on a previous promise to 'abolish leasehold' entirely, again after pressure from Number 10.
'GROUND RENT NEITHER LEGALLY OR COMMERCIALLY NECESSARY'
"High ground rents, in addition to being an unwelcome or unaffordable expense for leaseholders, can make it hard to sell or re-mortgage properties. One example is a leaseholder who contacted me this week because their ground rent had increased from a nominal £25 per year to nearly £2,500.
"Presumably, the Government’s latest U-turn is the result of lobbying both in public forums and behind closed doors. Interested parties are arguing that abolishing ground rents would incur £32.7bn in losses, that the taxpayer would be on the hook for."
One example is the campaign group 'Pensioners for Ground Rent'. However, The Times recently reported that they are represented predominantly by freeholders not of pensionable age, and their cause is being championed by a top London PR firm.
'WATERED DOWN REFORM'
Concerningly, the Government seems to be listening to lobbying, rather than their own watchdog, the Competition and Markets Authority. The CMA recently concluded that “ground rent was neither legally nor commercially necessary, and we saw no persuasive evidence that consumers receive anything in return” says Darlington.
"The Leasehold and Freehold Reform Bill is highly vulnerable to being watered down. Parts of the valuation calculation are a 'phenomenally complex area to understand", to use the words of Shadow Housing Minister Matthew Pennycook. For example, reducing a rate in the calculation known as the Deferment Rate by just one percentage point, could double the cost of lease extensions in some cases.
"Those responsible for ensuring the bill meets its objective of making it 'cheaper and easier' to extend leases and purchase freeholds need to ensure they do not let vested interests get in the way of political mandate."
Image: https://homehold.org/knowledge-hub/
