Leasehold reforms: improving flat ownership

Leasehold ownership of flats has become a controversial issue in the property and legal sectors.

Allegations of mis-selling, excessive ground rents and a lack of clarity around service charges are just some of the issues the government has been considering as it attempts to deliver leasehold reform in England and Wales.

An inquiry into the government’s progress by the Housing, Communities and Local Government Committee led to a series of recommendations published last month.

The key proposal from MPs on the committee was that commonhold becomes the primary model of flats ownership. This allows freehold ownership of individual flats within a building.

Ultimately, tackling unfair practices in the leasehold market is the aim of both the committee and the government.

MPs want to see the Competitions and Markets Authority investigate mis-selling in the leasehold sector and to come up with proposals for a compensation scheme. They also want developers or estate agents to be up front with prospective buyers about property tenure, lease lengths, ground rent, and – if appropriate – how much a developer would sell the freehold for within six months.

A particularly worrying practice within the sector has been the offer of financial incentives for buyers to use particular solicitors. Quite righty, the committee wants this banned by the government.

Peppercorn ground rents, standardised invoicing for service charges, and proper consultations for leaseholders affected by substantial works within a building are a few of the committee’s other recommendations.

For those of us in the legal sector, other interesting recommendations include the government funding the Law Commission to conduct a comprehensive review of leasehold legislation.

Perhaps most interestingly, MPs want to see the government introduce low-interest loans to help leaseholders who want to enfranchise or extend their leases. This would effectively be an extremely welcome Help to Buy scheme for leaseholders.

It remains to be seen how many of the recommendations will be included in the government’s reforms but, overall, they seem eminently sensible.

Zep Bellavia is Managing Director of Newport-based solicitors and accountants Bellavia & Associates.