October 14 2018
UPDATE: On January 29 2019 Communities Secretary James Brokenshire held a round table with leaseholder groups, assuring them that zero ground rents were on the table.
Sebastian O’Kelly, of LKP and www.BetterRetirementHousing.com, argued for retirement housing also to lose its exemption from any ground rent ban.
This week we should have been able to announce three very positive proposals for supporting leaseholders. This followed on from the excellent work by Secretary of State Sajid Javid and his radical commitment that the government had finally agreed to a “crackdown on unfair leasehold practices”.
Unfortunately, Sajid Javid was promoted to Home Secretary and replaced by James Brokenshire.
In a script that nobody would have believed, even in the world of “Yes Minister”, Brokenshire is putting forward three proposals so deeply flawed and massively ineffectual that we wonder what he imagines is doing, and why?
The three announcements
1) A consultation on ground rents for new builds: https://www.gov.uk/government/news/communities-secretary-signals-end-to-unfair-leasehold-practices
2) A working party looking into the regulation of property agents: https://www.gov.uk/government/groups/regulation-of-property-agents-working-group
3) A statutory instrument on the creation of formal residents groups: http://www.legislation.gov.uk/uksi/2018/1043/contents/made
So what has gone so horribly wrong?
1. Ground rent consultation
In December last year Sajid Javid announced a bold move to “restricting ground rents in newly established leases of houses and flats to a peppercorn (zero financial value)”.
This was a move welcomed by everyone, except of course those who benefitted from this feudal practice, i.e. the landlords and developers.
This has been diluted into a timid whimper.
The consultation due to be launched on Monday now merely proposes changing the ground rent on most, but not all, new houses to a nominal (£10) rather than a peppercorn ground rent.
The problem of onerous leases in existing leasehold houses, and Sajid’s commitment to come forward with solutions before the summer recess, have evaporated. Flats are not even mentioned. Exclusions are proposed for some houses. There is no mention of ‘fleecehold’ or the ‘administration’ fees now prevalent.
The press release can be read here:
Majority of new-build houses to be sold as freehold and new leases to be capped at just £10 – ending unscrupulous practice of unnecessary leaseholds. New measures to make it easier for leaseholders to get tenant associations formally recognised and protect consumer interests.
Even the government’s press team seems not to check their releases and make basic mistakes. They advise that one of the objectives of the government’s ongoing work is:
“…, helping existing leaseholders who want to buy their freehold by working with the Law Society to make this process faster, fairer and cheaper, and ensuring tenants are not hit by unfair rental costs.”
The Law Society is the solicitors’ main trade body. What they probably meant to say was the ‘Law Commission’, which is the independent statutory body tasked with reviewing the legislation.
And why £10? What is this for? Ground rents are for no designated service whatsoever. Just end them.
Even £10 is a danger for leaseholders. LKP is aware of debt collecting solicitors chasing these, and adding costs.
What is needed is: stop creating more leasehold. Stop selling communal property tenure as a vulnerable tenancy, which encourages unscrupulous conduct.
Introduce commonhold, and get England in line with other countries in the rest of the world.
2. The regulation of property agents
This was another strong commitment by Sajid Javid, first publically announced at the Association of Residental Managing Agents (ARMA) conference last year. (Readers may be amused to learn that LKP was asked to organise for the Secretary of State to speak to the ARMA members last year. Not only did ARMA fail to credit LKP but they have been massively keen that we shouldn’t attend this year!)
What SoS Brokenshire announced is a working party to look at the issues. The problem is that not only is LKP not included but neither are any of the other groups involved in the regulation of this work, i.e. ARMA, ARHM and ARCO. One group who is included is LEASE, even though they have no mandate to cover this area or any experience in this field.
LKP was officially informed about the new scheme the day before it was announced, but things might smell a little more fragrant had LEASE not let it be known several weeks previously that they thought that their involvement in regulation might suddenly and unexpectedly be about to grow.
Of course it’s the Minster’s choice who he invites to help, but he can only act on advice.
3. Recognised Tenants Associatons
SoS Brokenshire asserts that the new Statutory Instrument (SI), which follows on from the back bench amendment introduced by Sir Peter Bottomley MP in 2015, will help make it “easier” to form residents groups.
Leaseholders may begin to smell something a little rotten when they get to this section:
“While many landlords are happy to engage with residents’ associations in their building…”
Lots and lots of landlords and managing agents obviously claim to officials that they love to work with residents groups. LKP has highlighted to officials the obstacles standing in the way of RTA’s for seven long years now. Despite this, the officials still don’t seem to find it strange that landlords and managing agents put so much effort into ensuring that RTA’s aren’t formed.
Leaseholders may be holding their heads in their hands when they get to this section:
“Under the new rules, landlords will be required to provide contact information of eligible leaseholders to the secretary of the residents’ association within 4 months of the request, providing that leaseholders have expressly consented to their details being shared.” [My italics.]
The SI is so weak that Sir Peter Bottomley is considering asking Parliament to cancel the whole thing and start again.
It is an insult to leaseholders, the sector and the lawyers, who have tried to provide input the Deparment over 7 years, that officials should make such a mess of this simple issue.
This SI follows no less than three consultations on RTA, the last of which ended nearly a year ago. Even the information provided to MPs is wrong. They have been told that the output from the last consultation has already been published. If it had it been it would be clear that it formed part of the basis for the SI. However, the MPs have been misinformed. The results of the last consultation have not been published. The relevant .gov page simply states “We are analysing your feedback”. As well as this many of the issues set out in the SI did not seem to form a part of any of the three consultations.
Minister Wheeler has assured Sir Peter that he will feel “happier” when he reads the explanatory notes to the SI. We fail to see how any ‘explanation’ can overcome the fact of the fundamental errors in the way the SI was written.