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ISSUE No. 94 Autumn 2010

Clampdown by Coalition hits

Leaseholders By the Editor The new Coalition Government’s cutbacks and campaign to reduce red tape is already affecting leaseholders.

Managing Agents FPRA’s hopes for an independent regulator for property managers and commercial landlords have been dashed. The new Housing Minister Grant Shapps has scrapped the previous Government’s plans to regulate the private rented sector. He said he has no plans to regulate agents who manage blocks of flats and their service charge funds, and he believes councils have sufficient powers to deal with rogue managing agents.

Regulations proposed by the previous administration in response to the Rugg Review have been judged by the new Coalition as “too much additional red tape”.

Service Charge Accounts The Coalition Government have also abandoned the implementation of regulations requiring service charge accounts to be held in designated accounts, and for certain accounting information to be provided with service charge invoices. These provisions were in the Commonhold and Leasehold Reform Act 2002 but have never been brought into force. The Coalition consider them to be another unnecessary bureaucratic burden on businesses.


Commonhold is another matter which has been removed firmly to the back burner, if not actually abandoned. In response to an approach from FPRA Chairman Bob Smytherman, this negative and discouraging reply was received from the Legal Policy Division of the Ministry of Justice:

“You are concerned that the requirement for 100 per cent support for a transfer from leasehold to commonhold effectively restricts development of commonhold to new build. You call for a mechanism to be established to enable the majority of leaseholders in a property to convert from leasehold to commonhold in order to get the transfer process started.

“Commonhold is a voluntary alternative to long leasehold ownership. Making conversion from long leasehold easier would increase the take up, which is very low at the moment, but would require significant amendment of the commonhold legislation.

“Most importantly, this would almost certainly require permitting long leases in commonhold. Special arrangements would then have to be made in relation to the leaseholders’ rights under landlord and tenant law regarding acquiring the freehold, service charge payments and the management of the property. This would give rise to difficult issues as to the treatment of those leaseholders as against leaseholders generally.

“The Government has no plans to change the commonhold legislation but, subject to the demands of other priorities and availability of resources, will consider proposals for change.”

A further nail in the coffin of commonhold is the ending of funding for commonhold. The Ministry of Justice has said it will no longer fund LEASE (the Government leasehold advisory service) for advice to clients on commonhold.

And Just for Good Measure In the same vein, Mr Shapps has rejected FPRA calls for the full disclosure of insurance and other commissions by freeholders, which he says is a matter for the insurance industry and the FSA, and also our appeal to improve S20 rules (see page 3).


To manage, or not? S20 experience

Insulation brick wall Buyers beware Ask the FPRA Legal jottings

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