Real Estate

House of Lords votes through leasehold reform bill without cap on ground rents

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The House of Lords has voted through the leasehold reform bill without the promised cap on ground rents in an eleventh-hour debate as legislators scrambled to approve critical policies before the suspension of parliament.

Campaigners had feared the legislation would be among measures scrapped before parliament dissolves on May 30 ahead of the election on July 4, but the upper house announced a debate in the final hours of the “wash up” period when laws can be rushed through. 

The bill makes big changes to the system of leases under which about 5mn homeowners in England have rights to their property for a fixed period, and often pay fees and ground rents to a freeholder.

But the government on Friday said it would not add a last-minute amendment to bring in a cap on ground rents, a policy pushed by levelling up secretary Michael Gove.

Labour peer Lord Roy Kennedy said the bill was “far, far short of what was promised”, but Conservative peer Lord Daniel Moylan hit out at it “being rushed through in the most reckless fashion”.

The legislation includes banning most new leasehold houses, making it easier for leaseholders to buy out or extend their lease and increasing transparency around service charges.  

Some freehold property owners have bitterly opposed the bill, saying some of its measures are unfair and would reduce the value of their legitimate investments.

But the passing of the bill was welcomed by campaigners. Harry Scoffin, founder of campaign group Free Leaseholders, said it was “not perfect, but it is the only game in town for leaseholders”.

The British Property Federation, the real estate industry group, said it supported large parts of the current bill but that “there are several other contentious proposals . . . which we would argue should not be passed”. 

The government consulted on plans to cap all ground rents at nominal levels, a policy favoured by Gove. In March, opposition from the Treasury forced Gove to compromise and instead pursue a £250 cap.

Number 10 on Friday said: “In recognition that this is a complex area . . . it would not be right to ask peers to vote on this without allowing peers to properly consider these proposals. It’s not possible to deliver all of our commitments during this wash-up period.”

Freehold owners of properties will welcome the scrapping of the ground rent cap proposal. They have lobbied hard against measures in the bill, including changes to the financial calculations when leaseholders want to extend or buy out their lease, which the owners argue would hurt the value of their investments.

Some companies have threatened to sue the government for interfering with their property rights, which could become a problem for the next government.

Matthew Pennycook, Labour’s shadow housing minister, on Thursday said his party would “finally bring the archaic and iniquitous leasehold system to an end” if it won the election.


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