Rebecca Evans, Minister for Housing and Regeneration
This was published under the 2016 to 2021 administration of the Welsh Government
There has been widespread criticism of poor practice in the use of leasehold. This government has made clear its commitment to responding swiftly and firmly to these issues.
In the debate on leasehold on 31 January, I committed to taking some immediate actions to curb the particular use of leasehold for new build houses. As I said then, I do not believe this practice is appropriate. Leasehold does have its place as a tenure (for flats, for example), but I will only support its use where it is appropriate - and this does not apply to new build houses other than in very specific circumstances.
As a first step, I undertook to use the tools currently at my disposal to ensure our popular and successful schemes supporting home ownership and assisting home builders do not allow bad practice.
Today, I am introducing a package of measures which have been designed and developed by the Welsh Government with the co-operation from the sector through our House Builder Engagement Programme. As part of this engagement, we have already secured confirmation from major developers including Bellway, Redrow, Taylor Wimpey, Barratt Homes and Persimmon that they will no longer offer houses for sale on a leasehold basis unless it is absolutely necessary. I look forward to the other developers making the same commitment to cease the practice.
I have also had an agreement from the Home Builders Federation that they will discuss and share with the Welsh Government their submission to the Law Commission consultation into alternatives to selling flats on a leasehold basis.
Welsh Government will not support poor practice that impacts negatively on homeowners. That is why new criteria for Help to Buy-Wales being introduced today will require a developer to present a genuine reason for a house to be marketed as leasehold. Without a valid reason, which might include National Trust or Crown land, for example, it will not be eligible for Help-to-Buy-Wales. In addition, the terms of any new lease agreement, for both houses and flats, will have to comply with new minimum standards I am introducing into Help to Buy – Wales. Any leasehold contract will have to comply with these minimum standards to qualify for sale with the support of the Help-to-Buy-Wales scheme.
These new minimum standards include limiting the starting ground rent to a maximum of 0.1% of the property’s sale value. Any future increases in ground rent will have to be linked to a government recognised inflation index, such as the Retail Price Index. This will put and end to ground rents increasing exponentially and ensure they remain affordable. Leases will also have to run for a minimum of 125 years for flats and 250 years for houses. These minimum terms will provide security to the leaseholder by maintaining the property value and giving assurance the freeholder will not be in a position to force an unfair agreement at the point of renewing a lease.
To ensure compliance with all of the measures I am introducing today they will be included in the contracts Help to Buy-Wales have with the house builders. This will mean that any house builder offering homes for sale with our support will be legally obliged to meet with these new requirements.
Another significant issue I am able to tackle at this point is home buyers not being properly advised of the implications of their lease agreements and other ongoing commitments. There have been concerns raised regarding the practice of developers recommending particular conveyancers to prospective purchasers. I am introducing the Help to Buy - Wales Conveyancer Accreditation Scheme to ensure all purchasers have access to good quality independent advice. To qualify for accreditation conveyancers will have to complete training designed and delivered by Help to Buy – Wales. They will have to comply with the high standards set out by the scheme. In addition to demonstrating their experience in the Help to Buy - Wales process they will have to provide clear, understandable and documented advice on leasehold, service charges, ground rents and unadopted roads.
The performance of all accredited conveyancers will be monitored by Help to Buy-Wales to ensure these high standards are maintained. Of course, whilst use of an accredited conveyancer will be a requirement if purchasing under Help to Buy-Wales, we will also be promoting use of accredited conveyancers by anyone buying a new home, even if they are not funding through Help to Buy - Wales.
The Help to Buy - Wales Conveyancer Accreditation Scheme already has nearly 150 trained members across all regions of Wales. From today, a full list of accredited conveyancers will be available on the Help to Buy - Wales website and from home builders and financial advisers who use the scheme.
The Welsh Government also provides encouragement and assistance to small, local house building companies through the Wales Property Development Fund. This scheme grants accessible, affordable development loans to SME home builders. To ensure this highly successful and important fund does not allow poor practice I am today introducing the same Help to Buy - Wales leasehold criteria to properties built with support through this scheme.
The actions I have outlined today will address some of the key concerns relating to leasehold for new build homes. They will ensure that all Welsh Government programmes designed to support the building and ownership of new homes provide home buyers with a proper level of protection and support.
However, this is only the start of my plans to address concerns about leasehold, and I will be continuing to develop policy in this area. I have asked officials to set up a multi disciplinary task and finish group to expedite this.
I also intend to put in place a voluntary Code of Practice to underpin these measures and improve standards and engagement between all parties and promote best practice.
Finally, I reiterate that I am not ruling out the possibility of future legislation. I recognise that legislation may be needed to resolve the wider issues and make leasehold, or an alternative tenure, fit for the modern housing market.
Setting out our path for any wider reforms requires detailed consideration which is why I am commissioning research and engaging with the Law Commission Law Commission project looking at this issue. Once I have the benefit of the Law Commission’s report and our own research, I will set out our next steps. In the meantime, I continue to explore every avenue currently at my disposal to address the valid concerns being raised.