The Welsh government publishes next steps for leasehold reform in Wales
The Welsh Government has published new research into the sale and use of leaseholds where the Housing Minister, Julie James MS, sets out her intentions for reforming the sector. The action plan considers other evidence from the Task and Finish Group on Leasehold Reform and recommendations made by the Law Commission.
The report contains information on how leasehold operates in Wales, providing insights into the impact it has. It was commissioned to fill gaps in Ministers’ understandings of how the sector works and is one of several initiatives taken following criticism of poor practice.
- There are approximately 235,000 leasehold properties in Wales, representing 16 per cent of the housing stock.
- In general, purchasers buy a leasehold property based on location, type, and issues such as security, rather than making an active choice to buy a property of this type.
- Leaseholders do not fully understand the implications of the law when they buy a leasehold property, due to the legislation’s complexity.
- Even those who understand the law aren’t necessarily prepared for the lived in experience of leasehold.
- Leaseholders participating in this research echoed the disadvantages highlighted by the Law Commission: the lease is a wasting asset and leaseholders do not experience the freedom and control they expect from property ownership.
- The position and experience of leaseholders in Wales are not substantially different from that revealed by investigations into leasehold in England.
No good reason for monetary ground rent
Along with recommendations from the Law Commission and the Task and Finish Group, consideration has been given to a range of evidence including Senedd debates and questions and other relevant activity including the Competition and Markets Authority’s ongoing investigation into leasehold sales practices.
Julie James MS, Minister for Housing and Local Government, Welsh Government, said:
“The evidence is compelling that there is no good reason for the imposition of monetary ground rent in leases. Its use, especially where the rent is high or where terms are onerous, inevitably leads to poor outcomes for leaseholders. Ground rents do not provide value for leaseholders and where they escalate, they can become unaffordable over time.
“High or escalating ground rent can also have a compounding impact on the cost for a leaseholder who needs or wants to extend their lease or purchase their freehold, effectively trapping them in the lease by making enfranchisement unaffordable.”
Ownership tenure of last resort
Without action, leasehold will become the ownership tenure of last resort, therefore, the Minister’s intentions to reform the sector include:
- Restrict future ground rents to zero for leasehold properties in the third phase of Help to Buy-Wales
- Pave the way for a permanent restriction of future ground rents to zero at the earliest legislative opportunity
- Seek the UK Government’s agreement that our officials work together to explore a joint approach to legislation enacting Law Commission’s recommendations
The Law Commission’s report contains measures to bring about a fairer system by limiting restrains on freeholders to buy or extend their lease. They also include recommendations to improve the Commonhold system as an alternative to leasehold.
The Minister is fully supportive of the Law Commission’s recommendations, however, states they will require significant primary legislation. This will need full support from the future Welsh Parliament following the elections to be held in May 2021.
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