In his King’s Speech earlier this month, King Charles discussed important reforms being made to the UK leasehold system, despite Michael Gove’s previous suggestions that it might be scrapped altogether. More specifically, King Charles said it would be made cheaper and easier for leaseholders to purchase their freeholds, whilst addressing the exploitation of homeowners through unfair and unjustifiable service charges.
These reforms are a step in the right direction in many ways, but are they enough and what are they missing?
The King’s Speech has highlighted progress in leasehold reform (albeit, not revolutionary progress). These reforms will make it cheaper and easier for leaseholders to extend their leases, whilst expanding the right for leaseholders to acquire their ‘Right to Manage’ (permitting buildings with up to 50% commercial leasing to change management, instead of 25%), and creating more transparency for residents. These changes are indisputably positive, helping leaseholders gain control over their property’s management and how their money is spent.
Meanwhile, these reforms have implemented changes to regulate ‘rogue’ property managers’ services. They are looking to speed up and control the costs of sharing information with owners and create transparency around how service charges are calculated. They have also put measures in place to stop businesses unethically skimming commissions from homeowners. However, ‘rogue’ property managers are (thankfully) in the minority and the King’s Speech missed crucial opportunities to help good property managers deliver a better service, and lower costs, for residents.
Ultimately, these reforms fail to address areas of real cost to the end consumer that the legislation itself creates. For example, the reforms have not made it easier for leaseholders to make payments amid the cost-of-living crisis, as service charges remain excluded from recovering credit card fees despite rental payments being included. This means agents cannot offer this as a form of payment without significant cost implications. Transparency is essential and providing leaseholders with more legislative rights is important, but these changes are not aiding residents’ regular expenditures, nor managers’ abilities to offer their customers invaluable flexibility.
Moreover, some of these changes will hinder the work of trustworthy, reliable property managers. By placing time restrictions on the gathering and sharing of information with leaseholders, which is a substantial task, businesses may be forced to undercharge for this service, whilst potentially struggling to maintain the same standard of quality in their due diligence.
Several additional changes would have been of greater benefit to residents, I believe. For example, raising the S20 threshold to speed up works and minimise admin fees, allowing agents to recover credit card fees so they help customers with payment options, removing the need to send everything by post unless you opt in, and more. The backbone of the legal system around leaseholders does need reform, but so do the archaic practices that inhibit those trying their hardest to help.
If you want to reduce costs to leaseholders, you must remove friction to operators as well. That way, agents can spend more time providing a better service.
David Goldberg is CEO of POD Management
