Of new tenancy terms and unfortunate neologisms

It has been almost four years since Karen Buck MP, Justin Bates and I first conceived of the Homes (Fitness for Human Habitation) Bill (version 1), and it has been quite the rollercoaster since then. Now, as of today, 20 March 2019, the Homes (Fitness for Human Habitation) Act 2018, (version 2, or 4, depending on how you count it), is in force for all new tenancies of under seven years, or new periodic tenancies. The implied term that a let dwelling will be fit for human habitation at the start of the tenancy and kept in that condition throughout will be in its first tenancies today.

Now (or in a little while), we will get to see what the courts make of it. But forgive me a moment of happiness.

….

OK, I have had my moment. Now back to things that need changing. The Commons Housing, Communities and Local Government select committee has published its report on its inquiry into leasehold reform. The full report is well worth reading. (For transparency, I gave evidence to the committee and am cited here and there.)

The headline recommendations are:

  • The Govt ensure that commonhold becomes the primary model of ownership of flats in England and Wales, as it is in many other countries.
  • The Competition and Markets Authority investigate mis-selling in the leasehold sector and make recommendations for appropriate compensation.
  • The Govt require the use of a standardised key features document, to be provided at the start of the sales process by a developer or estate agent, and which should very clearly outline the tenure of a property, the length of any lease, any ground rent or permission fees, and—where appropriate—a price at which the developer is willing to sell the freehold within six months.
  • The Govt prohibit the offering of financial incentives (by developers/sellers) to persuade a customer to use a particular solicitor.
  • (Ambitiously,) that legislation should limit existing ground rents to 0.1% of the present value of a property, up to a maximum of £250 per year. They should not increase above £250 over time, by RPI or any other mechanism. (With some unspecified level of compensation by the Govt to freeholders/receivers of ground rent)
  • All new leases should be at a peppercorn rent (not the £10 ground rent suggested by the Govt).
  • Permission fees should be limited by legislation, and for freehold properties only where reasonable and absolutely necessary.
  • The CMA is asked to give its view on whether ‘onerous’ ground rent clauses are unfair terms and so unenforceable.
  • Service charges should be in a standard form, identifying the elements of the charge.
  • The Govt should implement a new consultation process for leaseholders affected by major works in privately-owned buildings. A threshold of £10,000 per leaseholder should be established, above which works should only proceed with the consent of a majority of leaseholders in the building.
  • The Govt should legislate to require that freeholders’ tribunal costs can never be recovered through the service charge, or any other means, when the leaseholder has won the case. (Tricky one as expressed. How to decide if the leaseholder has ‘won’? My stated preference was to change section 20C so it applied as the default, and the freeholder/landlord would have to make argument as to why it shouldn’t apply.)
  • Law Commission should come up with a process making enfranchisement ‘substantially’ cheaper.
  • Loan interest loan schemes for leaseholders to afford to enfranchise,
  • And ask the Law Commission to completely overhaul leasehold law.

Mostly, these are very sensible recommendations, though interfering with existing lease terms is, to put it mildly, not going to be easy. However there is one recommendation that I simply cannot accept:

There are clearly very significant differences between the freehold and leasehold tenures, but these are not always apparent to prospective leaseholders at the point of sale. As we will come on to recommend, this should be made much clearer to prospective purchasers from the start of the sales process. Our view is that it would be more appropriate to refer to this tenure as ‘lease-rental’. The Government and others may wish to use this terminology in future publications and policy statements.

No, no, no, no. Not about the principle, but that is an awful coinage. An ugly, lumpen, cut and shunt of a failed portmanteau with the gap between front and back showing.  I like words, some of my best friends are words, but I could never welcome that term into my home. We can do better than that…

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Assured Shorthold tenancy, assured-tenancy, Disrepair, Housing law - All, Leasehold and shared ownership, secure-tenancy and tagged , .

9 Comments

  1. My daughter managed to buy her first flat (1 bed) with her partner, it was a conversion of a terrace in London, conversion was done by a social housing company.

    Having heard about the rip off Leasehold on houses scandal I was concerned that the annual ground rent was a whopping £2500 per annum. I was wondering is this is a new trend and whether you see it being a new excess that needs to be nipped in the bud?

    I am aware that freeholds can be bought but at what price with this obscene price for ground rent.

  2. Agree about ‘lease-rental’, but whatever word is used, it will come to recognised in its own right and the confusion will remain. People understand car-leasing isn’t car-sales, so maybe people need to learn English properly, especially on occasions when they will spend a lot of money.

    Putting that to one side though, I wonder if this would put a spanner in the works of posited social housing schemes for resident controlled/housing co-operative/CLT schemes where the plan was to obtain public land at minimal initial cost and then pay a ground rent to the council, so they achieve a return over time and overall benefits of the land remain with the community.

    That might be a limited section of the market, but it’s one that was being investigated and piloted here and there and it would be a shame to see the baby thrown out with the bathwater in otherwise sensible reform.

  3. Not even if the intention was to have mixed tenure, including long leases and shared ownership (though that would apply more often to housing association style CLTs than housing co-ops) ?
    It wouldn’t be an end to possibilities, but we might need to be careful business plans don’t rely on anything that might be unenforceable. I’ll have to pay attention to this as it develops I think.

    • If the structure is freeholder of land -> long lease of land to an organisation -> organisation grants sub-tenancies/leases of part., then it wouldn’t affect the ground rent payable by the organisation to the freeholder. However, if the organisation was looking to grant long residential leases of part, then it might affect those leases, yes.

  4. I was under the impression that the Leasehold Reform Bill would contain new rules on fair amounts for charges to renew leases and a more reasonable calculation for amount to purchase freeholds. Has this been taken out or have I gotten completely the wrong end of the stick here?

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