Leasehold Reform Proposals

[topflat29 10]

Following CMA action, leaseholders with Taylor Wimpey will no longer be subjected to ground rents that double every 10 years.

From:

Competition and Markets Authority

Published

22 December 2021

 

Taylor Wimpey to strike out terms that mean ground rents double every 10 years in latest CMA victory for leaseholders. Affected leaseholders’ ground rents will no longer increase and will remain at the amount charged when they first bought their home. Investigation into Barratt Developments ongoing.

 

Taylor Wimpey – one of the UK’s leading housing developers – has voluntarily given formal commitments to the Competition and Markets Authority (CMA) to remove terms from leasehold contracts that cause ground rents to double in price. The effect of these increases, which kick in every 10 years, is that people often struggle to sell or obtain a mortgage on their home. Their property rights can also be at risk if they fall behind on their rent.

 

Taylor Wimpey will also remove terms which had originally been ground rent doubling clauses but were converted so that the ground rent increased in line with the Retail Prices Index (RPI). The CMA believes that the original doubling clauses were unfair terms and should therefore have been fully removed, not replaced with another term that increases the ground rent.

 

The move comes after the CMA launched enforcement action against 4 housing developers in September 2020. These were Countryside and Taylor Wimpey, for using possibly unfair contract terms, and Barratt Developments and Persimmon Homes over the possible mis-selling of leasehold homes. As part of this action, the CMA has already helped thousands of leaseholders by securing commitments from Countryside and Persimmon, as well as from an investor in freeholds, Aviva.

 

Due to the CMA’s action, affected Taylor Wimpey leaseholders will now see their ground rents remain at the original amount – i.e. when the property was first sold – and they will not increase over time. Taylor Wimpey has also confirmed to the CMA that it has stopped selling leasehold properties with doubling ground rent clauses.

[Jeffrey Shaw 90]

Note that this (CMA edict) applies only to 'doubling every 10yrs' ground rent leases- not to other types, inc. RPI-linked rents. Several landlord companies have seemingly decided to recoup these losses by loading new freehold covenants and extra costs onto tenants (leaseholders) who wish to enfranchise. I've an ongoing battle with Persimmon as to this, at present.

[topflat29 10]

Make a complaint to CMA to let them know about Persimmons 's new freehold covenants.

[topflat29 10]

The Bill

The Leasehold Reform (Ground Rent) Bill, together with its Explanatory Notes, Impact Assessment and an overview of its parliamentary progress, is available on the Parliament website: Leasehold Reform (Ground

Rent) Bill [HL].

The Bill received its first reading in the House of Commons on 15 September 2021. Second reading is scheduled for 29 November 2021.

 

The Bill applies to England and Wales. Its provisions, once in force, will restrict ground rents on newly created long residential leases (with some exceptions) to a token one peppercorn per year. This effectively restricts ground rents to zero financial value. The intention is to make leasehold ownership fairer and more affordable for leaseholders.

 

The Bill places a duty on local weights and measures authorities (trading standards authorities) in England and Wales to enforce the Bill.

 

A breach of the ground rent restriction will be a civil offence for which enforcement authorities can impose a financial penalty of between £500 and £30,000. The money raised through financial penalties may be kept by authorities to fund their enforcement activities. They will also have the power to order the repayment of any unlawfully charged ground rent, plus interest, to leaseholders.

 

The Bill also prohibits the charging of administration charges in relation to peppercorn rents and makes provision for leaseholders to recover unlawfully charged ground rents through the First-tier Tribunal in England or the Leasehold Valuation Tribunal in Wales.

 

If enacted, the main provisions of the Act will come into force on a date to be specified by the relevant Secretary of State. But for retirement home leases (a lease relating to a dwelling that can only be occupied by people aged 55 or over), the Act’s provisions must commence no earlier than 1 April 2023. This is intended to give the retirement sector, where ground rents are often used to help fund the additional costs of providing communal spaces and facilities, additional time to transition.

 

 

Issues raised during consideration in the House of Lords

 

The Leasehold Reform (Ground Rent) Bill, HL Bill 1 of 2021-22 was introduced in the House of Lords on 12 May 2021. Transcripts of the House of Lords stages are available on the Parliament’s Bill webpage: Leasehold Reform (Ground Rent) Bill [HL].

 

The Bill was widely welcomed as a positive first step in leasehold reform.

 

Nevertheless, several issues and concerns were raised during the Bill’s passage through the Lords, including the following :

 

the Bill will only apply to new leases and will not assist existing leaseholders faced with high and escalating ground rents;

 

the lack of a firm timetable for the more substantive second part of leasehold reform legislation;

 

concern that unscrupulous landlords may pressurise leaseholders to agree voluntary lease extensions, as a means to continue their ground rent arrangements;

 

concern that trading standards authorities face budgetary pressures and may not have capacity to enforce the new legislation;

 

the broad definition of ‘ground rent’ in the Bill; and

 

the Bill’s commencement date and the transition period for leases of retirement homes.

[Jeffrey Shaw 90]

The principal problems are:

a. that the Bill will only apply to new leases and will not assist existing leaseholders faced with high and escalating ground rents; and

b. the lack of a firm timetable for the more substantive second part of leasehold reform legislation.

 

Another is the sheer complexity of L&T legislation. There are already over 100 whole or part Acts on the subject and, other than a small exercise in 1985, there's never been any consolidation [= the amalgamating of the whole into a single new Act or set of interlocking Acts]. This is a problem for solicitors just as much as for leaseholders!

 

Complain either to your MP or to the Law Commission https://www.lawcom.gov.uk/

[topflat29 10]

This  extract  was posted on the leaseholdknowledge website  :

 

An investor who bought a Taylor Wimpey re-sale flat in London with doubling ground rent – and paid the Vincent Tchenguiz  organisation £5,000 to vary the lease to rise with RPI – is to be included in the Taylor Wimpey settlement agreed with the Competition and Markets Authority.

Taylor Wimpey’s decision is an about-turn for the company that had been telling owners of re-sale properties with the toxic lease terms it created that there were on their own.

The reverse ferret by Taylor Wimpey came about after one of the buyers contacted the Leasehold Knowledge Partnership, which suggested a meeting between the company and the MP co-chairs of the APPG on leasehold and commonhold reform.

 

Sir Peter Bottomley MP, APPG co-chair, has indicated that the meeting between Taylor Wimpey and the APPG should nonetheless still go ahead “before the next stage of parliamentary action”. Justin Madders MP, also co-chair, echoed this in order to establish “all the different categories and what TW’s offer covers”.

 

A neighbour in the same block, also a buy-to-let investor who had paid £5,000 to Tchenguiz’s freehold owner company Theowald Limited to vary the lease to RPI, was given the brush-off by Taylor Wimpey:

 

[Jeffrey Shaw 90]

HMG is now consulting on the Law Commission's proposals re leasehold reform.

See the website at https://www.gov.uk/government/consultations/reforming-the-leasehold-and-commonhold-systems-in-england-and-wales/reforming-the-leasehold-and-commonhold-systems-in-england-and-wales

 

[topflat29 10]

The latest news is a consultation  closing on  22 Feb 2022 from  Housing Minister :

 

We are consulting on a number of Law Commission recommendations that would broaden access to enfranchisement (buying the freehold) and the ‘right to manage’ a building. The proposals would increase the ‘non-residential limit’ from 25% to 50%, allowing leaseholders in buildings with up to 50% non-residential floorspace to buy their freehold or claim a right to manage. We are also considering recommendations that allow leaseholders to require that a landlord take on leases for any non-participating units following a collective enfranchisement; the introduction of a non-residential limit for individual freehold acquisitions; and changes to voting rights in right to manage companies.

On Commonhold, we are considering how shared ownership products could work in commonhold settings; and the provision of information for buying and selling a commonhold property.

 

https://www.gov.uk/government/consultations/reforming-the-leasehold-and-commonhold-systems-in-england-and-wales

Edited January 31, 2022 by topflat29

[Jeffrey Shaw 90]

Yes, as per my preceding post.

But I've also submitted a suggestion in response that what's most needed is to consolidate/rewrite the  > 100 Acts of Parliament on the topic of L&T.

[topflat29 10]

Latest news at 14 March 2022 :

 

https://commonslibrary.parliament.uk/leasehold-reform-in-england-and-wales/

 

Future legislation will:

• Reform the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
• Abolish marriage value.
• Cap the treatment of ground rents at 0.1% of the freehold value and prescribe rates for the calculations at market value. An online calculator will simplify and standardise the process of enfranchisement.
• Keep existing discounts for improvements made by leaseholders and security of tenure.
• Introduce a separate valuation method for low-value properties.
• Give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”.
• Allow for redevelopment breaks during the last 12 months of the original lease, or the last five years of each period of 90 years of the extension to continue, “subject to existing safeguards and compensation”.
• Enable leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term.

[Jeffrey Shaw 90]

All useful stuff; thank you. Let's see if any of it ever comes to be implemented and when.

[topflat29 10]

The Leasehold Reform ( Ground Rent) Act 2022  was granted Royal Assent on 22 Feb  2022 ? and should become law within 6 months.

 

The wording of the Act is difficult to follow and it may be easier to understand the explanatory notes  ( which are not part of the bill ) .  see  website  below  :

 

https://publications.parliament.uk/pa/bills/cbill/58-02/0164/en/210164enlp.pdf

 

Item 1 states :  Through this Bill the Government aims to make leasehold ownership fairer and more affordable for
leaseholders by ensuring that freeholders/landlords will no longer be able to make financial demands for ground rent.

 

Item 2 states : This Bill seeks to achieve the above by restricting  ground rents on newly established leases of  houses and flats to a token one peppercorn per  year, effectively restricting ground rents to zero  financial value.

 

Item 18 states : For qualifying tenants of flats, the Leasehold  Reform, Housing and Urban Development Act  1993 sets out the right to a new lease for the remainder of the existing term plus a further 90  years, commonly referred to as a lease extension.    A premium is payable, but the new lease must  contain a peppercorn ground rent.

 

Question : This Act applies to new leases only   Can the existing lease be legally  extended without becoming a new lease.?