There has been much written in the press during the past few years regarding the urgent need for housing reform. The government has vowed to get tough on residential developers in order to improve standards and stamp out what they view as unscrupulous selling practices such as leasehold houses, ‘hidden’ future charges, unreasonable ground rents and user restrictions.
Whilst the problem of existing leasehold housing is going to take some time to unpick, the concept is (in most cases) a relatively straightforward one. The largest ‘offenders’ have been named and shamed into action in relation to their historical homes. With the assistance of lenders, who can move quickly to update their lending requirements, there is now very little scope for anyone to sell houses on a leasehold basis unless there are legitimate reasons for doing so. However, other issues such as existing ground rents are not quite as easy to resolve.
The government has indicated its intention for all future ground rents to be set at a ‘peppercorn’ rate. This will require careful consideration so as to avoid problems with valuation and marketability of existing leasehold properties. There must surely also be some regard to the financial interests of existing freehold reversionary landowners, even if this may be limited. The lenders have adjusted their requirements but have yet to make any decisive move on abolition of ground rents so until such time as the government progresses legislation, the industry is left in a period uncertainty.
A recent press release has confirmed the first stages of legislative reform. The government has confirmed its intention to introduce a New Homes Ombudsman Scheme. This will apply to the whole of the UK. It will be compulsory, independent of the house building industry and underpinned by a new Code of Practice. Access to the Ombudsman will be free for buyers. It will introduce a range of powers including awards of compensation, ordering further works, requesting apologies or explanations as well as the ultimate sanction of expulsion from the Scheme. The proposals represent a material ramping up of regulation from that which currently exists via membership of a number of different consumer codes and their limited dispute resolution schemes.
Also of interest is the government’s published proposals for the next wave of the Help to Buy Scheme, due to operate from April 2021 until March 2023. The scheme will become limited to first time buyers (with criteria similar to that applicable to the existing stamp duty land tax relief). It will be available for properties under defined regional price caps (£600,000 for London and £437,600 for the South East).
A range of new quality measures have also been published. Any developer wishing to use the Scheme will have to comply. The Help to Buy Scheme has always required compliance with the Consumer Code for House Builders. The new measures will require compliance with New Homes Ombudsman Scheme and its associated code of practice. Builders are required to sign up to the, soon to be launched Building Safety Charter, designed to tackle risks inherent in leasehold blocks above 18m or over six floors in height.
Most telling of all is the requirement to sell all Help to Buy leasehold properties with a peppercorn rent, leaving developers in no doubt that the government remains committed to this aspect of reform.
