Industry pledge starts process of ending unfair leaseholds and fees
More than 40 leading property developers and freeholders in the UK have signed a new Government-backed pledge to crack down on toxic leasehold deals and help existing owners who have onerous deals.
They include Taylor Wimpey and Barratt Homes in a move that is designed to close the legal loopholes that force leaseholders to pay unjustified legal fees along with reforms to make retirement property fees more transparent.
It should mean an end to what is known as ‘doubling clauses’ that can result in ground rents soaring exponentially over a short period of time and the freeholders who have signed have committed to changing the terms of leases for those who are affected.
Other industry bodies such as managing agents have also put their names down, vowing to act fairly and transparently in their dealings with leaseholders.
Ministers have also announced plans to close the legal loopholes that force leaseholders to pay unjustified fees when they take their freeholders to court over pernicious service charges. This includes consultation with industry on whether these changes should apply to existing leases too.
Under current rules, leaseholders who wish to take their landlords to court to challenge exorbitant fees or unfair hikes in annual charges also run the risk of being forced to pay their landlord’s legal fees. This applies even if the court rules in their favour, hitting some tenants with bills of tens of thousands of pounds.
According to Secretary of State for Housing James Brokenshire, scrapping this loophole will reset the relationship between freeholders and leaseholders, stopping tenants being unfairly burdened with legal fees and ensuring they can access justice.
‘I have repeatedly made clear my ambition to end those exploitative and unfair leasehold arrangements that have no place in a modern housing market. The new industry pledge, signed by leading freeholders and property developers, will further support existing and future leaseholders by protecting them from onerous fees,’ he said.
‘It’s great news that leading names such as Taylor Wimpey and Barratt Developments have already signed up to the pledge, and I want to see others who have not yet signed up do the right thing,’ he added.
Housing Minister Heather Wheeler pointed out that the aim is to make sure there is a leasehold system where people are able to challenge exorbitant rates and high service charges. ‘It is unacceptable that the burden of legal fees, potentially running into tens of thousands of pounds, is preventing people from seeking justice,’ she said.
‘The plans will stop leaseholders from picking up the tab for unjustified legal costs, creating a housing market that truly works for everyone,’ she added.
According to Richard Silva, executive director of Long Harbour, older people and their families will be better protected across the retirement sector from unfair fees. ‘The Measures will stop older home owners and their families being hit with surprise fees when they may least expect or be able to afford it, often when they are at their most vulnerable, such as following the illness or death of a loved one,’ he explained.
Stewart Baseley, executive chairman of the Home Builders Federation, said it is good that the home building industry is committed to ensuring that leasehold is used appropriately and remains a safe and secure tenure for home owners.
‘This pledge is a further demonstration of the industry’s intent to provide home buyers with clarity, transparency and security ensuring that when used, the terms and conditions of leases are fair and proportionate,’ he said.
‘Options are being explored to close the legal loophole and Ministers will announce next steps in due course. This includes consultation with industry on whether these changes should apply to existing leases too. We will also raise awareness for how leaseholders can avoid paying their landlords legal fees through current legislation,’ he added.
According to Nigel Glen, chief executive officer of The Association of Residential Managing Agents (ARMA) the move gives leaseholders reassurance that their landlord will act fairly and responsibly towards them.
‘Addressing the problem of doubling ground rents is a welcome central theme to the pledge. ARMA is delighted that a part of this responsible approach is to ensure that managing agents acting for participating freeholders or developers should be regulated by a formal industry body, such as ARMA. This will ensure that leaseholders are given the highest standards of service,’ he pointed out.