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Transparency is paving the way for fairer homeownership – Rudolf

by: Beth Rudolf, director of delivery at the Conveyancing Association (CA)
  • 12/04/2024
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Transparency is paving the way for fairer homeownership – Rudolf
Progress towards genuine and, often life-changing, reform is hard won, time-consuming and can take many years to deliver.

We have a perfect example of that within our market, when it comes to leasehold reform, which fulfils this ‘brief’ incredibly well.


Beginnings of reform

Last month, you might have seen the Competition and Markets Authority (CMA) ruling entitled ‘Modern Leasehold: restricting ground rent for existing leases’. 

This was important and another step towards getting fairness for existing leaseholders, and reforming a system that leaves many at the mercy of doubling ground rents, trapping them in a cycle many feel unable to get out of. 

In this most recent intervention, the CMA has explicitly stated that ground rent is “neither legally nor commercially necessary” and explained that government is likely to need to ensure consumers do not continue to pay more and more for this ‘charge’. 

However, progress is being made, and the CMA has announced that eight more firms have removed problematic clauses from their leasehold contracts. This means approximately 500 more households are not going to be subject to their ground rent doubling in price.

We have urged our membership to keep an eye out for all the freeholders and housing developers listed by the CMA, to ensure they have removed their clauses. We’ve also asked our members to let us know whether leaseholders who should be benefitting from this move are being charged excessively for deeds of variation to enable these changes to be implemented. 

It has happened in the past, and is still being used as a money-generating exercise, in part because they can no longer benefit from the rising charges they are committing to remove. One last throw of the income-generating dice, if you will. 


Progress for leaseholders 

However, as mentioned, this is another positive step and, certainly for those impacted here, it should ensure they are no longer trapped in these properties, unable to sell or remortgage because of the doubling of ground rent every 10-15 years. 

This CMA intervention is also of interest, within the wider scope of home selling and buying and the process we have in place in order to ensure all participants are fully aware of what they are getting into, what their lease covers, the clauses it may contain, and whether all of this means they no longer wish to go ahead, for example, with putting in an offer. 

We have seen so many times, information only coming to light after the potential purchaser is emotionally – and often financially – invested in buying, and clearly when these are hugely significant commitments and responsibilities, such as being a leaseholder, or ground rent/service charges/estate rentcharges, etc, they should be known from the outset. 

Within the CMA documentation, it actively recognises the National Trading Standards Estate and Letting Agents Team (NTSELAT) for its work on material information and the guidance it provides.

It also notes how this has improved the transparency of the information available, ensuring homebuyers know the tenure of the property, the annual costs, etc, of owning the property “at the earliest opportunity in their property search”. 

It cites the NTS again for the work it is doing with property portals “to improve the availability of upfront information, including ground rent obligations, when consumers are searching online for property”. 


Correcting past unfairness 

In a very true sense, we’re seeing the chickens come home to roost for a period of many years when those involved in the sale of leasehold properties – specifically the developers and the freeholders – were relying on the breaking of Consumer Protection Rules (CPRs) to secure sales, by not providing this highly important information at the point of marketing. 

The repercussions of this now being taken more seriously, requiring agents and the like to provide this material information upfront, is clear to be seen, as are the repercussions of not doing this for all those years. 

One suspects that this ‘stick’ approach will continue to bear fruit.

Not just in terms of extricating existing leaseholders from these onerous clauses, but also in the ‘carrot’ it can provide to all those active in the property market, where greater levels of transparency, upfront information, etc, provides greater certainty for consumers, effectively meaning we can increase pipeline turnover and ensure far fewer dis-instructions and aborted or fall-through transactions. 

We are by no means ‘done’ in this part of the market, but the direction of travel continues to be a positive one, and it is to be hoped that we’re able to deliver much better news for those still living in these leasehold properties, and much greater clarity for those considering buying any property, let alone a leasehold one. 

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