Second reading of Leasehold and Freehold Reform Bill highlights need for property agent regulation

The second reading of Leasehold and Freehold Reform Bill in Parliament highlights the need for property agent regulation.

Members of Parliament debating the Leasehold and Freehold Reform Bill as it passed Second Reading in the House of Commons on 11 December 2023 highlighted the need for property agent regulation and several other areas to strengthen the legislation. 

The Leasehold and Freehold Reform Bill aims to make it cheaper and easier for more leaseholders to extend their lease, buy their freehold and take over management of their building as well as ban the sale of new leasehold houses.

During the debate, former Housing Minister Rachel Maclean MP said:

“There is a need for regulation of the property management sector more broadly….

“I urge the Minister to continue to push ahead with a reform that must happen, if not on this side of a general election, then on the other side.”

Other MPs raised concerns about improving consumer service and the role of managing agents within leasehold blocks including Sir Peter Bottomley MP, Chair of the Leasehold and Commonhold Reform APPG.

Bottomley said:

“Given that some managing agents are very large and people’s experience of them is not very good, we ought to try to make sure that there is not this continual amalgamation and that there is a good choice of good managing agents that want to earn a better reputation.”

Propertymark has long campaigned for the regulation of property agents and on the issue of leasehold reform with research released in 2018 shining a light on the issue. Our campaigning helped lead to the introduction of the Leasehold Reform (Ground Rent) Act in June 2022 and the New Homes Ombudsman.

To improve the UK Government’s proposals and give more rights and protections to homeowners, Propertymark think that reform is needed in several areas, including:
    • Introduce overarching statutory regulation of property agents – for sales, lettings, managing agents and sales staff selling property for building developers there are no minimum standards to work in the sector and there are no statutory rules to ensure those buying, selling and managing leasehold property are suitably qualified.
    • Phasing out leasehold on new flats – if the UK Government is serious about doing away with leasehold, then they need to ban leaseholds on all new flats as well as all new houses.
    • Mechanism to identifying and contact freeholders with offences for failing to respond – property agents report difficulties in getting hold of the freeholder during sales processes or when leaseholders need to get in contact with the freeholder to approve home alterations or to discuss issues with the lease which slows down the sales process.
    • Implement a code of practice and disclosure document concerning Event Fees in specialist retirement developments as drafted by the Law Commission in March 2017 – companies that own or manage specialist retirement properties, usually flats owned on a long leasehold basis, often include a clause in their lease agreements requiring owners to pay an “exit” or “transfer” fee when they wish to sell or rent out their homes.
    • Extend Flood Re to the leasehold sector – Flood Re is a levy and pool system in the UK, which replaced the Statement of Principles agreed between the Government and insurance companies to provide flood insurance coverage to domestic properties deemed at significant risk of flooding. The Flood Re obligation currently excludes the Private Rented Sector and the leasehold sector.
Commenting, Timothy Douglas, Head of Policy and Campaigns at Propertymark, said: 

“The Second Reading debate of the of Leasehold and Freehold Reform Bill has clearly highlighted the need for regulation of property agents and for the UK Government to look seriously at implementing the recommendations in Lord Best’s report.

“Overarching regulation of the sector is needed to support these reforms as well as proposals to change the private rented sector under the Renters (Reform) Bill.

“Regulation of property agents can protect consumers from bad practice and support businesses, ensuring fair competition and a level playing field for all.

“Propertymark will continue to make the case for regulation as the Bill makes its way to Committee Stage.”

Additional information:

In September 2018, Propertymark’s report Leasehold: A Life Sentence? highlighted the concerning reality of how leaseholders have been treated when purchasing their properties:

      • 48% were unaware of escalating ground rents attached to their lease when they purchased the property.
      • 60% of those leaseholders currently trying to sell their home report that they are struggling to sell because it is leasehold.
      • 62% of leaseholders felt that they were mis-sold when they bought their home.
      • 70% of leaseholders are worried that they will not be able to sell their homes because they are leasehold.
      • 94% of leasehold homeowners regret buying a leasehold.

Five years on from Leasehold: A Life Sentence, Propertymark published a follow-up report which explored the impact of recent legislation and work taken place to better inform homebuyers on leasehold:

      • 54% of agents who sell property on behalf of developers report that they do not always provide the pertinent leasehold information.
      • 60% of buyers ask for information about the lease before they view a property.
      • 72% of agents believe homebuyers are more aware of issue surrounding leasehold property.
      • 78% of Propertymark agents reported that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly.

Find out more from Propertymark here. 

 

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