Last year, the Government in England, held consultations on a number of proposals for the housing market, as part of its continuing efforts to ensure ‘decent and fair housing’ for those who need it. One big area of focus has been leasehold - getting rid of unfair practices and improving the leasehold/freehold relationship – and this is where most of these new proposals are targeted.
You can read the full response to the consultation on the government website but here is our summary of the plans that were announced at the end of June 2019.
Leasehold to be banned for new houses
The Government’s intention is for all new-build houses to be sold as freehold in the future and although there is no timescale yet for this legislation, immediate action is being taken to protect buyers who use Help to Buy. Homes England has already been instructed by the Communities Secretary to renegotiate Help to Buy contracts with developers to explicitly rule out the building and selling of any new leasehold homes under the scheme.
Given that there are over 4 million existing homes in England that are and will remain leasehold – particularly flats - the Government is also taking steps to ensure freeholders don’t take advantage of leaseholders. All ground rents for new leases are to be reduced to zero and when leaseholders come to sell their property, freeholders and managing agents will have just 15 days to provide all the information required to be passed on to a prospective buyer. The maximum fee chargeable for supplying this information will be limited to £200.
The intention is that as and when these proposals become law, freeholders will no longer be able to hold leaseholders to ransom by hiking up costs or imposing unfair restrictions that make houses too costly to own and hard or even impossible to sell.
Summary of the proposed changes:
- All new-build houses to be sold as freehold
- Help to Buy scheme to immediately be amended to exclude any leasehold new builds
- If a buyer is incorrectly sold a leasehold house, they will be able to get the freehold at no cost
- Ground rents for any new leases – including on flats – to be reduced to zero
- Any freeholder found to be charging ground rent unscrupulously can be fined up to £5,000 per property
- When existing leaseholders come to sell, freeholders & managing agents will have just 15 days to provide required information, at a maximum charge of £200
The introduction of a New Homes Ombudsman
As the Government presses on with its commitment to deliver 300,000 homes a year by 2025, it is keen to ensure that standards remain high and homebuyers get the quality of build they expect. So the proposal is for a New Homes Ombudsman to be established, to protect the rights of new home buyers and hold developers to account.
The Ombudsman would work with the industry, consumer groups and government to help ensure improvements and standards are delivered quickly and correctly. It would also operate a redress scheme to support homebuyers when things go wrong and require all new-build developers to belong to the scheme.
This is great news for consumers, who have now have the opportunity to input into how complaints against developers will be dealt with in the future.
A consultation has already been launched, seeking views on the details of the proposals, including what powers the Ombudsman should have, how it should be funded and whether there should be a legal Code of Practice specifically for new home developers.
Plans for a ‘national passporting scheme’ for tenancy deposits were revealed at the Chartered Institute of Housing’s annual conference in Manchester at the end of June. Security deposits are now seen as a financial burden for tenants when they move home, as they have to find the funds for a deposit on their new property before they’ve had their previous one returned. It is believed that this can lead to some tenants being ‘trapped’ in a rented property simply because they can’t afford to move, while others end up in debt to cover the cost.
To alleviate this pressure and make it easier for renters to move, the government is looking at ways in which deposits could be transferred directly between landlords.
Deposit schemes already offer the option to transfer ownership of a tenancy and its related deposit funds in cases such as a property being sold with tenants in situ, or a landlord switching managing agents. The main hurdle in extending this to when tenants move homes is the issue of any dilapidations for which deposit monies need to be retained. Usually, this amount cannot be confirmed until after a tenant has left a property.
Have your say…
At Reeds Rains we will be feeding back on our thoughts on these changes, but why not get involved and have your say on all proposals open for consultation via the government website? You can write, email or complete an online response form and help to shape future legislation for the property market:
New Homes Ombudsman - open until 22nd August:
Tenancy deposit reform – open until 5th September:
Abolition of section 21 – open until 12 October 2019: This is a consultation we promised to advise you on when it was launched so you can input your feedback.
Further information on the abolition of section 21 can be found in our recent article here >
Spotlight on Wales
This month there are a couple of things specifically for landlords in Wales to know about.
Firstly, Welsh housing minister Julie James AM has announced the Government’s intention to make changes that will result in tenancies being a minimum 12-month contract. At the moment, the law is essentially the same as in England, whereby a landlord can’t make a ‘no-fault’ eviction within the first six months and cannot issue a two-month notice to leave until the end of the fourth month.
The proposal is to increase the initial period during which the landlord cannot give notice, from four to six months, then extend the subsequent notice period from two to six months. Effectively, they would be introducing 12-month tenancies by default.
The proposal is currently out for consultation until 5th September. Have your say >
And, secondly, the ban on tenant fees gained Royal Assent in May and is due to come into force in Wales from 01 September 2019. As is now the case in England, landlords will not be able to charge tenants for things such as paperwork, viewings or tenancy renewals, which it’s estimated will save tenants almost £200. Tenants can only be asked to pay:
- Holding deposits – capped at the equivalent of one week’s rent
- Security deposits
- Charges for defaults, breaches and replacement items (such as door keys)
- Council tax, utilities, TV licence and communication services.
The government also has the power to limit the level of security deposits in the future, should it wish.