Leasehold Reform (Ground Rent) Bill, Second Reading, House of Commons, November 2021

It is vital that new burdens funding is provided to councils to support the proactive work necessary to ensure compliance with the legislation. This will enable councils to ensure compliance through supporting freeholders to understand and comply with the new requirements, with financial penalties being used as a matter of last resort.


Key messages

  • We welcome the Leasehold Reform Bill and the Government’s will to introduce legislation that will restrict ground rents on newly created long residential leases (with some exceptions) to a token one peppercorn per year. We also welcome the broader intention to make leasehold ownership fairer and more affordable for leaseholders.
  • Councils have a significant role to play as it will be local weights and measures authorities (trading standards authorities) who will enforce the new legislation if it is brought forward as currently drafted.
  • It is vital that new burdens funding is provided to councils to support the proactive work necessary to ensure compliance with the legislation. This will enable councils to ensure compliance through supporting freeholders to understand and comply with the new requirements, with financial penalties being used as a matter of last resort.  
  • While it is welcome that the revenue from financial penalties can be used to reinvest in enforcement services, it is important that this is not the sole source of funding for relevant compliance work. Council’s pride themselves on effective communication to communities and their ability to secure high rates of compliance with the legislation (meaning that financial penalties do not to be issued) should not be a disadvantage.
  • The LGA would also support funding being made available to the National Trading Standards, Estate and Letting Agent Team (NTSELA) to support councils in enforcing the new regulations.
  • Councils will require clear and timely guidance from the Government in order to enforce the legislation effectively. This will enable local authorities to bring about consistency in enforcement across the country. There should also be a national information campaign to make freeholders and leaseholders aware of the new rules.

Councils’ role in enforcing the ground rent restrictions

  • While we fully support the intent behind this legislation, it is critical that any new burdens on local authorities are met with adequate upfront funding and resources from the Government.
  • We welcome the provisions in the Bill that provide that a breach of the ground rent restriction will be a civil offence for which enforcement authorities may impose a financial penalty between £500 and £30,000 and that any monies raised can be kept to reinvest in enforcement activity. Allowing councils to keep money from fines is helpful but may not address the cost of the necessary proactive work. For example, it would not fund any upfront or proactive work that does not lead to any civil penalties being issued.  Therefore, revenue solely sourced from penalty fees will not be sufficient, especially as it will council’s intention to issue financial penalties as a last resort. It is also positive that the Minister raised the maximum penalty from £5,000 to £30,000 following concerns raised in the House of Lords.
  • Without upfront funding, the delivery of provisions in this Bill will require local government resources being diverted away from other council departments which could impact service delivery. This is a particular challenge for trading standards given the wide range of new enforcement duties the service is being tasked with enforcing.
  • The LGA would also support funding being made available to the National Trading Standards, Estate and Letting Agent Team (NTSELA) to support councils in enforcing the new regulations. The use of a lead enforcement authority for this type of new responsibility helps ensure that funding is appropriately targeted at the organisations enforcing specific areas of activity. This is an approach that has been utilised with other recently introduced property related legislation, for example the Tenant Fees Act 2019.
  • Councils will require clear and timely guidance from the Government in order to enforce the legislation effectively. This will help local authorities to bring about a consistency in enforcement across the country, ensuring that there is a level playing field for freeholders and leaseholders.
  • We are also concerned that not all leaseholders will be impacted by the new provisions in the Bill. Leaseholders who are facing high and escalating ground rents will see no benefit from this proposed legislation and the LGA would like to work with the Government to find a solution for all those in the leasehold sector.

Raising awareness of the ground rent restrictions

  • Enforcement must be supported by a national, Government-led information campaign to make freeholders and leaseholders aware of the new rules. Ensuring that freeholders and leaseholders are aware will reduce the potential for non-compliance, so it is important that Government undertakes a national awareness-raising campaign, backed with both funding and non-financial resources.

Contact

Jonah Munn, Public Affairs and Campaigns Adviser

jonah.munn@local.gov.uk