The Housing Minister, Rachel Maclean, has confirmed that a bill to phase out some leaseholds in England and Wales will be covered in the King’s Speech on 7th November, when the Government sets out its legislative agenda for the year ahead.
The Department for Levelling Up, Housing and Communities (DLUHC) estimates there are around 4.98 million leasehold homes in England, of which 70% are flats and 30% are houses. Meanwhile, the Land Registry reports that 24% of residential property transactions in 2022 were leasehold, approximately 207,000 transactions in total. Almost all flats are sold on a leasehold basis compared to 7% of houses.
Property industry experts were unanimous in welcoming the news. According to Gary Bush, financial adviser at the Potters Bar-based broker, MortgageShop.com: “It’s high time freeholders and their management companies were dealt with, as delays in property sale transactions and high fees for providing information feels very draconian, if not neo-feudal, in 2023.”
Peter Stamford, director at Alston-based Moor Mortgages, shared much the same view: “This is good news for people who want a clearer and more transparent housing sector. It’s strange that it’s coming from a conservative government, but I’m not complaining. The leasehold system has been a nightmare for sellers and plagued mortgage applications for far too long.”
Riz Malik, director at R3 Mortgages, was also pleased about the reforms but said the small print and timeline of the changes will be key: “Any reformation of leasehold properties will be greatly welcomed. Over the years I have seen countless delays in the buying and selling of property due to management companies, not to mention the onerous costs of service charges. However, we have been down this road before so it will be interesting to see what the proposals are in more detail and how long they will take to be implemented. It remains to be seen whether Rachel Maclean will still be in office at that point.”
Elliott Culley, director at Switch Mortgage Finance, was interested to see how far the reforms go in practice and the pushback they will likely endure: “Leasehold reforms are long overdue and could really benefit the housing market. Leaseholds can turn out to be really expensive for homeowners so it will be interesting to see how far the reforms go and what pushback there is as a result.”
Alastair Hoyne, CEO at London-based Finanze, also said the devil is in the detail: “It remains to be seen how this will be implemented, particularly for existing leasehold properties and freeholders. The devil is in the detail. There have been many abuses of the existing system and countless unnecessary delays in mortgage transactions, which needs to be addressed. Bringing a centuries-old system up-to-date is no mean feat given the range of stakeholders involved. This one looks set to run for a long time before we reach a resolution that is palatable to all.”
Like Culley, Ranald Mitchell, director at Norwich-based Charwin Private Clients, expects resistance and complications on the reform road ahead: “For me, it remains unclear though as to how widespread the reforms are going to be. New properties will be easier to set up on any new proposed system, but for existing leasehold property, I would expect a lot of pushback from freeholders and many complications. Either way, I hope the reform bill goes deep into solving as many of the leasehold problems as possible, clearly and decisively.”
Meanwhile, Jamie Thompson, director of Jamie Thompson Mortgages, said developers appear to know that the game is up: “The fact that leasehold houses have dropped to under 1% of all new builds shows how developers who tried to pull the wool over the eyes of buyers with ridiculous leasehold agreements in the late 2010s know that a quick buck simply can’t be made any more. Buyers of new homes have wised up to the awful terms and hence developers would struggle to shift them today. Plus they probably expect that the leaseholds on the books are going to get torn up.”
Graham Cox, founder at the Bristol-based broker, Self-Employed Mortgage Hub, didn’t pull any punches: “The whole leasehold system, for flats as well as houses, needs to be scrapped. It’s legalised extortion, open to abuse by freeholders and just another example of rip-off Britain.”
