The Conservatives have been accused of ditching their manifesto pledge to reduce ground rents to zero, after reports that Michael Gove is losing his battle to reform current leaseholds.
Gove, the levelling-up secretary, has been overseeing plans to overhaul the system in a reform bill, but key provisions to overhaul leaseholds were missing when the legislation was published in November.
After a consultation on caps to ground rents that closed in January, Gove had suggested that reducing ground rents to a token “peppercorn” rate could be added to the bill during its passage through parliament.
He told the Sun in February: “Before a general election I think what we can do is show that we will have passed into legislation, a lever, a rapid move to peppercorn or a stage-by-stage process whereby we get there.”
But the Sunday Times reported on Sunday that Gove was losing the argument on peppercorn rent after lobbying by investors and pension funds, which own freeholds that give them a predictable income.
One possibility is that a compromise £250 annual cap on ground rents could be reduced instead.
Gove had pledged to end the leasehold system altogether, calling it “outdated” and “feudal”. Millions of property owners own their homes through leases in England and Wales, which are almost the only places in the world where the system exists.
In its current form, the bill makes a series of reforms, including extending the default length of a lease and making it cheaper to convert leaseholds into freeholds.
Nevertheless, the manifesto pledge to “restrict ground rents to a peppercorn” has not been forthcoming after resistance from Downing Street, both in No 10 and the Treasury.
Angela Rayner, the shadow levelling-up secretary, said: “This latest dithering from the government on leasehold reform in the face of Tory infighting is yet another sign that Rishi Sunak is too weak to deliver for working people.
“At the last general election, the Conservatives pledged to restrict ground rents. If the Tories are abandoning another manifesto pledge, leaseholders need to know why.
“Labour is committed to comprehensive leasehold reform, enacting the Law Commission’s recommendations on enfranchisement, commonhold and right to manage in full.”
The Guardian revealed in February that the bill’s provisions to stop developers selling new houses as leasehold properties contains loopholes that will allow them to continue doing so in certain circumstances.
The new clauses contain exemptions that allow developers to continue to sell new leasehold houses if they are part of a retirement village or where an existing lease has already been granted on the land, even if no property has yet to be built.
On the current leasehold policy for existing ground rents, a Department for Levelling Up, Housing and Communities spokesperson said: “We are committed to strengthening protection for leaseholders and are bringing forward reforms through the leasehold and freehold reform bill.
“It is not fair that many leaseholders face unregulated ground rents for no guaranteed service in return – that is why we consulted on a range of options to cap ground rents for existing leases. We are pleased to note that the Competition and Markets Authority recently found that ground rents are ‘neither legally nor commercially necessary’.
“The government is currently considering the responses to the consultation and will set out its policy in due course.”
