Leasehold: Unfair Practices

Ministry of Housing, Communities and Local Government written question – answered on 6th September 2021.

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Photo of Colleen Fletcher Colleen Fletcher Opposition Whip (Commons)

To ask the Secretary of State for Housing, Communities and Local Government, what steps his Department is taking to help protect leaseholders from unfair practices in (a) Coventry North East constituency, (b) Coventry, (c) the West Midlands and (d) England.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under-Secretary (Housing, Communities and Local Government)

The Government is committed to promoting fairness and transparency for homeowners and ensuring that consumers are protected from abuse and poor service. We are taking forward a comprehensive programme of reform to end unfair practices in the leasehold market.

The Government asked the Competition and Markets Authority (CMA) to investigate potential mis-selling of homes and unfair terms in the leasehold sector. On 19 March 2021, the CMA announced that it is requiring the removal of ground rent terms which it thinks are unfair from all existing Countryside and Taylor Wimpey contracts to make sure they are no longer in breach of the law. The companies must also agree not to use the terms again in any future leasehold contracts. On 23 June the CMA announced commitments secured from Aviva and Persimmon to amend their practices regarding doubling ground rents and houses sold as leasehold. This is a hugely important step and demonstrates our determination to support affected leaseholders.

In January we announced we will 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. We will also introduce an online calculator, further simplifying the process for leaseholders and ensuring standardisation and fairness for all those looking to enfranchise. Through our reforms, the length of a statutory lease extension will increase to 990 years, from 90 years (for flats) and 50 years (for houses). Leaseholders will be able to extend their lease with zero ground rent on payment of a premium. Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’.

Having closely reviewed the Law Commission’s report on Commonhold we have established a new Commonhold Council as a partnership of industry, leaseholders and Government that will prepare homeowners and the market for the widespread take-up of commonhold. This will take time and close working with consumers and industry, and the Commonhold Council will be the critical first step of this.

The Government will respond to the Law Commission’s remaining recommendations on enfranchisement, commonhold and right to manage in due course.

We have brought forward legislation in the Leasehold Reform (Ground Rent) Bill to set ground rents on newly created leases to a genuine ‘peppercorn’ rate of only one peppercorn per year or effectively zero financial value. This will be the first part of seminal two-part legislation to implement reforms in this Parliament.

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