Propertymark’s response to the Modern Leasehold: Restricting Ground Rent for Existing Leases consultation urges Ministers to take the opportunity to make changes which will have significant benefits for consumers, agents, and businesses.
Skilled agents are needed
Effective management of a block of flats is a role that requires a competent and professional approach. Following the introduction of recent legislation including the Building Safety Act, managing agents need to have a good knowledge of landlord and tenant law, building construction, health and safety regulations, and basic accounting among a range of other skills - yet no requirement for training or qualification exists in the private housing sector.
Propertymark’s long-running campaign for minimum standards and regulation in the sector has recently been echoed in the Public Bill Committee for the Leasehold and Freehold Reform Bill by Martin Boyd, Chair of the Leasehold Advisory Service, and Shadow Housing Secretary Matthew Pennycook, MP, who has tabled an amendment to implement the RoPA report recommendations.
The sector is ready to adapt
The only way to ensure fairness for new and existing leaseholders is to set ground rents at a peppercorn. The sector has already moved to peppercorn rents for new leaseholds following the introduction of the Leasehold Reform (Ground Rent) Act 2022. So, we consider a one-year transition period would be enough time to prepare for the same measures on existing leases.
During any transition period, ground rents should be frozen to prevent unjustified increases by freeholders looking to offset losses at the expense of leaseholders.
Encourage adoption of commonhold tenure
An effective ban on ground rent will help encourage a move towards commonhold, which the UK Government has said is their preferred default tenure, without legally mandating it, and introduce freehold home ownership for flats or other properties that share communal areas or services.
Under commonhold ownership, unit holders can have a greater say in how their building is managed, including costs and responsibilities.
Transparency of charges
We consider transparency of charges and services to leaseholders to be vitally important to ensure that home buyers are provided with all the necessary information they need to make an informed choice.
While this may lead to an increase in the service charge for some, making the charge and the level of expected service clear would prevent leaseholders from being mis-sold leaseholds.
Exemptions must be carefully considered
Where leases are for community-led housing, business leases and home reversion plans or ‘rent to buy’ arrangements, where the purpose of ground rent is clear and does not lead to difficulties selling the property, we agree that exemptions to a ground rent ban are acceptable.
We do have concerns, however, that exemptions for negotiated agreements could be abused by the freeholder. Many consumers believe they were mis-sold leaseholds despite receiving the lease beforehand. It is possible that uninformed leaseholders could be coerced into unfavourable agreements which make them exempt from the cap.
