Leasehold: Reform

Department for Levelling Up, Housing and Communities written question – answered on 26th October 2021.

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Photo of Theresa Villiers Theresa Villiers Conservative, Chipping Barnet

To ask the Secretary of State for Levelling Up, Housing and Communities, whether freeholders will receive compensation for the loss of marriage value under the Leasehold Reform (Ground Rent) Bill.

Photo of Theresa Villiers Theresa Villiers Conservative, Chipping Barnet

To ask the Secretary of State for Levelling Up, Housing and Communities, whether he has made an estimate of the financial value of the marriage value which will be removed from freeholders under the Leasehold Reform (Ground Rent) Bill.

Photo of Theresa Villiers Theresa Villiers Conservative, Chipping Barnet

To ask the Secretary of State for Levelling Up, Housing and Communities, what assessment he has made of the effect of restricting ground rents, as proposed in the Leasehold Reform (Ground Rent) Bill, on (a) the involvement of professionals in managing blocks of flats and (b) fire safety.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

The Leasehold Reform (Ground Rent) Bill currently in Parliament will put an end to ground rents for new residential leasehold properties as part of the most significant changes to property law in a generation. The Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders. Leaseholders pay ground rent on top of their property purchase price and service charges, yet there’s no clear service provided in return.

This will be the first part of seminal two-part reforming legislation in this Parliament. In January 2021, the Government announced a package of reforms on enfranchisement valuation. The Government 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. Our reforms to enfranchisement valuation ensure that sufficient compensation is paid to landlords to reflect their legitimate property interests.

The Ground Rent Bill is focused entirely on the issue of ground rents. Service and management charges are beyond the scope of this Bill. The role of ensuring that the fabric of the building is maintained and safe for residents is an essential part of the relationship between freeholder, leaseholder and in some cases a managing agent. The cost of complying with these obligations is usually recoverable from the leaseholders through the service charge fund. In most cases the lease will allow the freeholder to recover the actual costs of the works, and the freeholder may also pass on the cost of managing or overseeing the works.

The Government is committed to bringing about the biggest improvement in building and fire safety for a generation.  The Building Safety Bill contains measures to protect leaseholders by providing a legal requirement for building owners to prove they have tried all routes to cover the cost of essential safety works, along with evidence that this has been done. If this does not happen, leaseholders will be able to challenge these costs in the courts.

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