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A former government minister has issued a warning that the prime minister could encounter a “mass rebellion” if the government weakens its commitment to reforming the leasehold system in England and Wales. Justin Madders emphasized to the BBC that Labour must uphold its promise to cap ground rents, the annual fees leaseholders pay to freeholders.
Labour’s manifesto pledged to address “unregulated and unaffordable ground rent charges,” yet worries persist that the government might retreat from imposing a cap due to concerns over how this could impact pension funds. Nonetheless, the government remains firm, stating it will introduce legislation to fulfill this promise and will provide more comprehensive details in the near future.
This development follows a call from former Housing Secretary Angela Rayner urging the government to honor its commitment to ground rent caps. Originally, ministers had planned to publish a draft bill before the end of last year that would reform, and potentially abolish, the leasehold system in England and Wales. The release of this bill has now been delayed, with the debate over ground rents cited as a key factor behind the postponement.
There are approximately five million leasehold properties in England and Wales, where ownership is granted via a lease from a freeholder for a fixed term. Though ground rents were eliminated for most new residential leaseholds in 2022, they remain applicable to existing leaseholders. Often, leases stipulate increases in ground rent based on fixed percentages or inflation measures, complicating the sale or mortgage approval process for these homes. In 2024, when in opposition, the current Housing Minister Matthew Pennycook expressed a preference for capping ground rents to a nominal “peppercorn” rate—such as £1 per year—though campaigners now expect any cap to be closer to £250 annually. Reports suggest a division between the Treasury and housing officials, with fears that a strict cap could negatively affect pension funds that own freeholds. Treasury sources acknowledge challenges in setting an appropriate annual charge but downplay any internal departmental conflicts, emphasizing efforts to find a balanced solution.
Justin Madders, who previously served as an employment minister, highlighted that Labour has “a clear manifesto commitment” on this issue and that numerous backbenchers feel strongly about it. In December, he organized a letter signed by over 80 Labour MPs urging the prime minister to enforce ground rent caps. While Madders stated that a peppercorn rent cap would be ideal, he acknowledged the risk of protracted legal challenges, making a cap of £250 a more pragmatic option. He warned that without a cap, passing the bill in Parliament would be impossible and predicted a “mass rebellion,” adding that he himself would be prepared to rebel over the matter.
Additional voices within Labour, such as Florence Eshalomi—chair of the Commons Housing Committee—have expressed frustration over the bill’s delay. She called on the government to cease stalling and fulfill its promise to end the “feudal leasehold system.” Meanwhile, leaseholders like Jon from Harrogate lament the impact of escalating ground rents on their housing situations. Jon described feeling “trapped in a nightmare” due to his leasehold ground rent of £200 a year, which doubles every decade. Since purchasing his flat in 2017, he claims his solicitor did not warn him about these charges, which have rendered the property unsellable and un-mortgageable, forcing him and his wife to continue renting while saving for a larger home. He expressed horror at the government’s inaction.
Advocates including Katie Kendrick, co-founder of the National Leasehold Campaign, report that mortgage lenders are increasingly wary of escalating ground rents, leading to frequent property sales falling through. Kendrick warned that if ground rents are not capped, it would represent “another broken promise” that leaseholders would not forgive, predicting widespread uproar among MPs if the government reneges. She dismissed claims that pension funds would be unduly harmed, calling such arguments “rubbish” since only a small number would be affected and they anticipated these reforms. Harry Scoffin, founder of the Free Leaseholders group, criticized any retreat from ending ground rents, stating Labour promised to “end the feudal leasehold system” and warned that tolerating any financial ground rent amounts would not fulfill that pledge. Conversely, a spokesperson for the Residential Freehold Association argued that capping ground rents would constitute an unprecedented and unjustified infringement on property rights, potentially undermining investor confidence in the UK housing market.
From the government’s perspective, a ministry spokesperson acknowledged that “far too many leaseholders face unregulated and unaffordable ground rent charges,” reaffirming their commitment to legislate on the issue and bring an end to the leasehold system, with further details to be announced in due course
Read the full article from The BBC here: Read More
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