In June this year, the Competition & Markets Authority (CMA) struck a deal with Aviva and Persimmon Homes that saw the two firms give leaseholders the option of buying their freehold at a discounted price.

This took place as focus on the sector sharpened, with many people concerned about the misselling of leaseholds. In March this year, the CMA ordered Countryside and Taylor Wimpey to remove certain leasehold terms from contracts, and the government opened 2021 stating it had plans to reform leasehold in a big way.

The issue has been brewing for a while. Just last year there were various requests for a serious look at a commonhold model of homeownership. In May 2021, housing secretary Robert Jenrick launched an advisory body for this purpose.

We have been pressing the government for reform for over eight years… so we hope that a leasehold and commonhold reform bill will be in the next Queen’s Speech

Conveyancing Association (CA) director of delivery Beth Rudolf enthuses: “The CA is very supportive of the initiative taken by Persimmon and Aviva… and would encourage other developers to follow suit.

“We know the CMA has evidence of four other developers that created issues through doubling ground rents and other onerous lease terms, and we would encourage them to take the stance of Persimmon and Aviva in trying to put the issues right for their customers — not just on houses but also on flats, where rent doubles will surpass the Housing Act prescribed limits, creating issues with the ability to get a mortgage.”

The question arises of whether the deal with the CMA signals imminent reform for leasehold.

Rudolf says: “We have been pressing the government for reform for over eight years and it has already made many, many announcements — but no legislation. The Law Commission reports in July 2020 were supported by the government, so we hope that a leasehold and commonhold reform bill will be in the next Queen’s Speech.”

From the broker point of view, Mortgage Vision director Alan Overy says: “Given the ‘commitments’ made by some of the big players, this certainly appears to be a sea change in the way leaseholds are structured and paid for. It brings them right into the spotlight and reminds everybody of the perceived unfair practices that have gone on.”

Meanwhile, Propertymark chief policy adviser Mark Hayward comments: “The CMA’s decision is the beginning of a wholesale change for the leasehold sector and shows just how seriously the government is taking the matter. I imagine this will probably be the first of a series of announcements around the restructuring of leasehold tenure.”

Buyers should not avoid leasehold properties. The leasehold system has worked well for hundreds of years

However, Chesterton Humberts director Eric Shapiro provides a sobering viewpoint.

“This is not a binding decision in law and is not a reform of the legislation,” he says.

“The companies concerned have entered a voluntary agreement to reverse what was an unreasonable original position. These onerous ground rent provisions can be bought out under the current law and, where a tenant was not properly advised as to the nature of these reviews, an action for negligence can be taken against the buyer’s solicitors. The government is proposing reform but this will be some time away.”

And, despite leasehold terms provoking such strong opinion, they are still a big part of UK housing.

When asked if potential buyers should be wary of leasehold properties, Shapiro replies: “These oner-ous lease terms only affect a limited number of leasehold flats. In fact, virtually all flats are held leasehold, although some leaseholders have a share in the freehold having participated in a collective enfranchisement.

“No, buyers should not avoid leasehold properties. They need to understand what they are buying and take advice on the cost of remedying any defect and reflect that cost in the purchase price. The leasehold system has worked well for hundreds of years but bad landlords make bad cases and these are the exceptions.”

Overy says he makes sure his clients know the terms and, “the fact that some mortgage lenders wouldn’t lend on properties with egregious ground rent clauses would also alert buyers to this danger”.

This is not a binding decision in law and is not a reform of the legislation

As for the future of leasehold in the near term, Rudolf says: “The Law Commission set out the need for those fed up with their lease administrator to be able to convert their property to commonhold and take over the management of their shared areas and amenities.

“The government has a Commonhold Council looking at how this could be delivered for the consumer and we know that, of the commonholders that responded to our survey, they very much supported it, especially those who had experienced leasehold.”

Shapiro adds: “Acts of parliament have been proposed by the Law Commission and the changes will be wide-ranging, but their end form is not known.”

Rudolf concludes: “We would encourage anyone who purchased a leasehold property between 1 January 2000 and 1 October 2015 to instruct their conveyancer to check their title to see whether they are entitled to claim under the Consumer Protection from Unfair Trading Regulations if they were missold to.”