Leaseholders reforms ditched by Tories due to shadowy lobbying

  • Post last modified:March 26, 2024
  • Reading time:5 mins read

The Conservative Party has just quietly axed yet another manifesto housing pledge, hoping no one would notice. Unfortunately the media has, as it relates to a controversial area of housing for leaseholders. Predictably, people affected are up in arms – with one person telling the Canary that Gove has caved in to “shadowy lobbying” and pressures from Downing Street.

Tories axing yet another manifesto pledge

The Tories have axed reform of what fees property leaseholders have to pay to the ultimate owner – the ‘freeholder’. As the Financial Times reported, Michael Gove was supposed to be reforming:

the centuries-old system of leases under which millions of homeowners have the right to occupy their homes, which are ultimately owned by a freeholder — who collects annual payments called ground rents.

However, after pressure from chancellor Jeremy Hunt’s Treasury department, Downing Street itself, and pension funds and investment managers – Gove has caved in.

The Guardian reported that:

The Conservatives have been accused of ditching their manifesto pledge to reduce ground rents to zero, after reports that Michael Gove is losing his battle to reform current leaseholds.

Gove, the levelling-up secretary, has been overseeing plans to overhaul the system in a reform bill, but key provisions to overhaul leaseholds were missing when the legislation was published in November.

After a consultation on caps to ground rents that closed in January, Gove had suggested that reducing ground rents to a token “peppercorn” rate could be added to the bill during its passage through parliament.

Now, Gove has even scrapped the ‘peppercorns’ – leaving little in the Bill for leaseholders.

The Leasehold and Freehold Reform Bill is being debated in the House of Lords for the first time on Wednesday 27 March.

‘Unwelcome and unaffordable’ for leaseholders

Reacting to Gove’s caving-in to external powers, Linz Darlington, founder of leaseholder legal advice service Homehold, told the Canary:

Over the weekend, the Sunday Times reported that the Conservative manifesto pledge to restrict ground rents to a peppercorn has been “quietly axed”. This pledge has been much championed by Michael Gove and leaseholders hoped it would be added to the Leasehold and Freehold Reform Bill.

The decision not to pursue a ground rent cap of a peppercorn is a major concession which comes less than a year after Michael Gove was forced to roll back on a previous promise to “abolish leasehold” entirely, again after pressure from Number 10.

High ground rents, in addition to being an unwelcome or unaffordable expense for leaseholders, can make it hard to sell or re-mortgage properties. One example is a leaseholder who contacted me this week because their ground rent had increased from a nominal £25 per year to nearly £2,500.

‘Shadowy lobbying’

Darlington was clear on who the culprits were in this latest leaseholders U-turn:

Presumably, the Government’s latest U-turn is the result of lobbying both in public forums and behind closed doors. Interested parties are arguing that abolishing ground rents would incur £32.7bn in losses, that the taxpayer would be on the hook for.

One example is the campaign group “Pensioners for Ground Rent”. However, the Times recently reported that they are represented predominantly by freeholders not of pensionable age, and their cause is being championed by a top London PR firm.

Concerningly, the Government seems to be listening to shadowy lobbying, rather than their own watchdog, the Competition and Markets Authority. The CMA recently concluded that “ground rent was neither legally nor commercially necessary, and we saw no persuasive evidence that consumers receive anything in return.”

The Leasehold and Freehold Reform Bill is highly vulnerable to being watered down. Parts of the valuation calculation are a “phenomenally complex area to understand”, to use the words of Shadow Housing Minister Matthew Pennycook. For example, reducing a rate in the calculation known as the Deferment Rate by just one percentage point, could double the cost of lease extensions in some cases.

‘Vested interests’ versus leaseholders

Darlington summed up:

On 27 March the Leasehold and Freehold Reform Bill will be debated for the first time in the House of Lords, which has historically been associated with vested interests related to property.

Those responsible for ensuring the bill meets its objective of making it “cheaper and easier” to extend leases and purchase freeholds need to ensure they do not let vested interests get in the way of political mandate.

Leaseholders will have to wait and see what the House of Lords has to say, before knowing whether extortionate ground rents will continue to be forced upon them.

Featured image via Wikimedia

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