The next steps to reform the leasehold system in Wales have been announced by the Welsh Government.

The following information can be read in full on the PropertyMark website

Key findings of the research

There are approximately 235,000 leasehold properties in Wales, representing 16 per cent of the housing stock.

In general, purchasers buy a leasehold property based on location, type and issues such as security, rather than making an active choice to buy a property of this type.

Leaseholders do not fully understand the implications of the law when they buy a leasehold property, due to the legislation’s complexity.

Even those who understand the law aren’t necessarily prepared for the lived in experience of leasehold.

Leaseholders participating in this research echoed the disadvantages highlighted by the Law Commission: the lease is a wasting asset and leaseholders do not experience the freedom and control they expect from property ownership.

The position and experience of leaseholders in Wales is not substantially different from that revealed by investigations into leasehold in England.

Problems with leasehold properties

The Housing Minister said that the new research will be taken into consideration alongside a report from the Task and Finish Group on Leasehold Reform and recommendations made by the Law Commission, as well as other evidence and relevant activity, such as that by the Competition and Markets Authority.

Taken together, the Minister does not see any good reason for the imposition of monetary ground rent in leases. This is because the evidence shows they do not provide good value and the costs can become unaffordable. They can also prevent freeholders from extending their lease or purchasing the freehold. Furthermore, where ground rent rises to over £250 a year, these leases qualify as an Assured Shorthold Tenancy, leaving leaseholders open to mandatory possession grounds for relatively minor arrears.

What the Welsh Government plans to do

Without further action, the Welsh Government fear that leaseholds will become the ownership tenure of last resort. To this end, the Minister has set out her intentions for reforming leasehold:

Restrict future ground rents to zero for leasehold properties in the third phase of Help to Buy-Wales.
Pave the way for a permanent restriction of future ground rents to zero at the earliest legislative opportunity.
Seek the UK Government’s agreement that officials work together to explore a joint approach to legislation enacting the Law Commission’s recommendations.

The Law Commission’s report contains measures to bring about a fairer system by limiting restrains on freeholders to buy or extend their lease. They also include recommendations to improve the Commonhold system as an alternative to leasehold.

Whilst the Minister is fully supportive of the Law Commission’s recommendations, she admits they will require significant primary legislation. With the Welsh elections to be held in May this year, they will also need the support of the future Welsh Parliament.