Conveyancers have welcomed a significant turning point in their lengthy campaign to reform leasehold law, welcoming government proposals to tackle unfair and unreasonable abuse.
The Department for Communities and Local Government is concerned that new-build houses are being sold on a leasehold basis to create an income stream from the ground rent, or to generate additional income from selling the freehold interest after contracts are exchanged.
Proposals in today's consultation paper include removing 'as far as possible' help-to-buy equity loan support on new-build houses where these are sold as leasehold. Ground rents in new leases would be limited to start and remain at 'peppercorn' level. Leaseholders would be excluded from possession orders over ground rent arrears. Freeholders on mixed tenure estates with shared facilities would be able to challenge unreasonable service charges.
Law Society president Joe Egan said: 'Leasehold has long been an effective way to manage properties with shared or communal areas. However, the recent behaviour of some developers, setting excessive ground rents or selling free-standing houses as leasehold not freehold, have left some homebuyers in a difficult position.'
Beth Rudolf, the Conveyancing Association's director of delivery, hopes today's proposals will deal with the 'single biggest loophole' - the Commonhold and Leasehold Reform Act - which excludes leasehold homeowners from being protected from unreasonable fees and delays when buying, selling or improving their property.
Rudolf said: 'This loophole means that one particular landlord openly continues to charge £300 for a deed of covenant when the first tier tribunal issued a judgment against them three years ago saying these should only cost £80.'
The association will this year explore whether commonhold is a viable alternative to leasehold. 'After all, why should the number of years which a person can possess and live in a property reduce each year when they have paid the same amount for it as they would have done if it was freehold?,' Rudolf asked.
The consultation closes on 19 September.