BPF response to Draft Commonhold and Leasehold Reform Bill

Commenting on the Draft Commonhold and Leasehold Bill, our Director of Policy (Real Estate) Danny Pinder said:

“While we agree that rapidly escalating ground rents should be addressed, the proposed cap will interfere with investments made by pension funds and institutional investors over many years and undermine the Government's pursuit of investment in this country. The various documents published by the Government today make clear that these changes will have an impact on freeholders - the value of their assets and their ability to match index-linked pension liabilities - but that they intend to proceed, nonetheless. We have long been clear that adequate compensation must be provided to these entities as they have invested in good faith in order to meet their liabilities and continue to fund everyone’s pensions - today’s announcements is silent on that point.

“There are elements within the commonhold proposals that responsible freeholders will support, including reforms to the funding of major works. However, the management of buildings is complex and the introduction of commonhold needs to be carefully phased to ensure the market, including conveyancers, lenders and managing agents can fully understand the changes and their implications. The Government's proposals to abolish forfeiture and introduce a new statutory lease enforcement scheme appear sensible at first pass but will need closer scrutiny to ensure they strike an appropriate balance between tenant and landlord protections.

“There are billions of pounds invested in large-scale residential and mixed-use developments, and it is essential that reform is mindful of the rights of property owners as well as leaseholders. In our legal system contract is sacrosanct and legislative changes that cut across and undermine existing commercial agreements will raise the risk premium that investors attach to the UK at a time when the Government is seeking to attract domestic and private capital for its growth agenda. We want to work with Government as the Bill goes through the legislative process to ensure that unnecessary economic harm is minimised.”