Leasehold reform may have unintended consequences for leaseholders

Leasehold reform hasn't made much progress lately, despite the much-publicised promise last year of new legislation to benefit homeowners. The Queens Speech in December noted the Government's intention to reform unfair practices in the leasehold market. But no date was given for when new legislation might be introduced. Clearly, the pandemic has put less urgent Government business on hold. Now questions are being asked.
Flat owners will be pleased to hear that Clive Betts MP, the chair of the Housing, Communities and Local Government Committee has written to the Housing Minister Christopher Pincher, asking him to outline the Governments' current timetable for the introduction of reforms and to detail any interim measures you will put in place in the meantime.

Law Commission

Mr Betts doesn't mince his words. While the Committee appreciates that the Government will want to wait for the Law Commission to conclude its ongoing review of existing leasehold law, it is vital that the abuses this committee uncovered are addressed, he says. He is clear that leaseholders continue to suffer from onerous ground rents, permission fees, opaque and excessive service charges, and high enfranchisement costs and they are understandably desperate for these to be remedied as a matter of urgency. Add to this the ongoing cladding scandal which is impacting thousands of leaseholders around the country and the Government's record for rapid resolution of the serious issues impacting leaseholders doesn't look good.
We support Clive Betts' call to speed up the much-needed reforms revealed last year. However, leasehold and the relationship between freeholders and flat owners - is complex. For example, setting ground rents at zero benefits residents in the short term but may lead to freeholders, denied of an income stream, not bothering to take an interest in good quality asset management, to the detriment of leaseholders and leading to decaying housing stock.
Right to Manage may provide a remedy to this problem but, in our view, one of the biggest problems that remains unaddressed is that once acquired by leaseholders, this right is not transferable. This is a diminishing disaster. What it means is that as flat owners move on, the annual costs of running the RTM company fall to fewer and fewer people. The end result is that one leaseholder could end up shouldering all the costs. This can't be right and must be fixed.
So we welcome Clive Betts timely intervention but urge the Government to make a real effort to understand how leasehold works on the ground. We think some of the proposed reforms could have unintended consequences for flat owners and the blocks they live in. What do you think?

If you are struggling to sell your property with a short lease, wanting to enfranchise or claim your right to manage, then Team Ringley can help.

• Lee Harle - Head of Law

www.ringley.co.uk
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