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All change in the Residential Leasehold Sector - Our 'Property Matters' Leasehold expert Mark Chick explains changes in the Leasehold Sector

23 May 2018

Last updated at 15:35

We invite our 'Property Matters' leasehold expert Mark Chick, partner at Bishop & Sewell LLP to explain upcoming changes that affect leasehold property.

All change in the Residential Leasehold Sector

Mark Chick - Partner at Bishop and Sewell LLP

Recent Government consultations on amongst other things, ‘tackling unfair practices in the Leasehold market’ have led to a number of outcomes which are likely to see changes for the Leasehold Sector.

In addition, the Government has also recently consulted on the regulation of managing agents and improving the ‘buying and selling process’ (AKA conveyancing).

The Government has indicated that there is a need for greater accountability in relation to property management and managing agents and they propose that all managing agents should be subject to a new regulatory framework. The exact detail of this is yet to become clear.

In relation to conveyancing, the government’s conclusion is that there is no single change that would deliver a meaningful improvement to the process, but rather that it will be a series of small incremental changes which are likely to deliver a significantly better system. We do also know that the increasing use of electronic elements in transactions is likely to become a feature and the first digital mortgage was recently registered.

In the leasehold sector, the recent ‘leasehold scandal’ has led to action and the Law Commission is charged with reporting back before the Parliament’s summer recess with suggested solutions to the issue of leasehold houses and residential ground rents. It is not clear what the exact extent of the recommendations will be, but it is clear that the government is minded to receive recommendations that may prohibit the grant of new leases at a ground rent for leasehold houses (and possibly more widely) and that there is a likely to be a prohibition on the creation of new long leases at a ground rent in respect of houses and possibly also for flats.

Lenders have also responded to the issues within leasehold and notably Nationwide (and others) have changed their lending policy so that for new build properties the leasehold term must be not less than 250 years if the property is a house and 125 years if a property is a flat. Similarly, the starting ground rent cannot be more than 0.1% of the property value. By way of example, if the property is worth £500,000.00 the start in ground rent cannot exceed £500.

There are numerous other possible changes and the Law Commission is currently looking not only at the issue of leasehold flats and houses, but also the possibility of re-invigorating Commonhold which has been on the statute books since September 2004.

In short, this is an exciting time in leasehold and in the property sector more widely and we are likely to see changes in the short to medium term future.

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