Newsflash: Tackling unfair practices in the leasehold marketPrint publication
The Government is consulting on perceived unfairness in the leasehold market, including the sale of new leasehold houses and onerous ground rents; the recovery of possession for arrears of ground rent; and the inability of freeholders on shared estates to challenge the reasonableness of service charges. Walker Morris Real Estate and Housing Litigation experts Louise Power and Karl Anders explain.
Unfairness in the leasehold market?
Earlier this year we published a Walker Morris Insight which highlighted to house builders and developers the issue of ground rents in the leasehold residential development market. In short, homeowners, the media, politicians and even industry representatives have raised concerns about onerous ground rent liabilities rendering homeowners trapped in unsaleable homes which they can no longer afford. The problem can be compounded where the house builder/developer has sold the freehold to a third party investor who then demands large premiums in return for the sale of the freehold to individual homeowners, or where arrears of ground rent result in homeowners facing repossession.
In an attempt to address these, and related, issues, the Government is seeking views on various matters, including the following, in its consultation paper ‘Tackling unfair practices in the leasehold market’:
- whether and how the Government should limit the sale of new leasehold houses
- what reasons are there for houses to be sold with leasehold (as opposed to freehold) tenure
- whether and how the Government should limit the reservation and increase of ground rent on new residential leases
- what effect the restriction of ground rents would have on the supply of new build homes
- whether arrears of ground rent should be exempted from ‘Ground 8’ possession orders made pursuant to the Housing Act 1988; and
- whether freeholders occupying shared private estates should be given rights to challenge the reasonableness of estate service charges similar to those enjoyed by leaseholders.
The issues addressed in the consultation are ones that are increasingly being raised with us by our clients and will be of interest to all stakeholders involved in the housing sector. As the consultation closes on 19 September 2017, any business that may be affected by the outcome of the Government’s review should urgently consider whether to respond with their feedback.