"Was it something I said?” Whistleblowing during the pandemic
Natasha Forman (née Koshnitsky)
At the end of July the Government announced a new consultation on the ownership structure of new build Homes in England, following the surge in recent years in new build Leasehold houses. Historically, Leasehold interests (for a fixed term of years) are reserved for flats in blocks or houses split into flats, as a neat way of distributing and managing the repair, maintenance and insurance obligations between the tenants and the Freeholder. Conversely, a freehold is a perpetual estate in land which, in the absence of restrictive covenants or estate ‘rent charges’, are not subject to regular payments to a reversionary owner.
The Government is of the view that the use of Leasehold houses has resulted in ‘unfair charges’ and ‘onerous terms’ being imposed on homeowners including excessive ground rent increases, that have made some homes impossible to sell because the ground rent is expected to hit £10,000 a year by 2060. Communities Secretary Sajid Javid has dramatically claimed “Enough is enough. These practices are unjust, unnecessary and need to stop.”
The consultation is expected to take eight weeks, so the first waves of direction should be surfacing in the coming days/weeks. However, it is highly anticipated that the consultation will seek a ban on the practice of selling leasehold houses. In addition whilst it is expected that any proposals made will only affect future sales, it remains to be seen whether there could be any retrospective effect for those caught by these recent practices. It has been reported that some high profile house builders have already begun setting aside large sums of money in anticipation/preparation of any retrospective effect of this consultation. There is speculation that compensation (similar to that involved in the PPI repayments), maybe available.
Whilst we will need to wait and see what the consultation proposes, it is envisaged that the consultation will have effect on a number of people. Two groups who will want to keep a close eye on developments will be:
For now, it will be business as usual, but it would appear the ‘end is nigh’ for leasehold houses and their attractiveness for developers/investors, much to the satisfaction of homebuyers.
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