In December 2017 the government stated it would introduce legislation to tackle unfair practices in the leasehold market by prohibiting interests in new built houses being granted on residential long leases and restricting ground rents to a nominal sum.
A consultation was held in Autumn 2018 to investigate why houses should not be sold as freehold by default and whether ground rents should be set to a sum of £10.
The conclusions of the consultation are to:
- Ban all new residential long leases (over 21 years) of new build or existing freehold houses – subject to limited exemptions such as shared housing, community-led housing or retirement properties. This ban will apply on any freehold land and any leasehold land acquired from 22 December 2017 onwards.
- Restrict ground rents to a peppercorn – subject to exemptions for shared housing, community led or mixed use properties.
- Introduce new protections for freeholders paying an estate rent charge – they will be able to challenge the reasonableness of such estate rent charges and have a right to apply to the First Tier Tribunal to appoint a new manager if appropriate.
- Set a maximum of 15 working days to provide leasehold information (upon request) and to set a maximum fee of £200 plus VAT for provision of that information.
The legislation will be introduced without a transitional period but will be limited to England only. The government has not yet announced a timescale for the proposed legislation, but once introduced, it will not be possible to register a residential long lease which does not meet the above conditions.
Landlords should be mindful of these proposals. If you would like to discuss the implications of the reforms, please get in touch with your usual DACB contact.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.