The government has been busy. Just before Christmas it responded to the consultation on “tackling unfair practices in the leasehold market” by outlining plans to restrict the sale of leasehold houses and setting new ground rents at a peppercorn.
Shortly afterwards it announced that it would be pressing on with its anti-corruption policy of introducing a new public register recording the ultimate beneficial owners of overseas companies that own land in the UK. Although both sets of reform are driven by good intentions, translating those intentions into good law is going to be a challenge.
Take the ban of the sale of houses on a leasehold basis, it is clear that there will be an exception for development schemes held on leases that existed as at the date of the government’s response but what about proposed leasehold schemes where contracts have been exchanged or where plots on a freehold scheme have already been sold off on long leases?
Equally, overseas investors, who have been so active in the UK market, are wondering what is in store for them over the next three years. Under the government’s plans, the UK is to be the first country in the world to require overseas companies that own property within the jurisdiction to provide details of their ultimate owners.
The register is expected to implement a scheme similar to the recently introduced “people with significant control register” which has applied since 2016 to companies and LLPs incorporated in the UK.
An overseas company that fails to comply is likely to be penalised by losing the ability to sell, let or charge the property and may even face criminal sanctions.
“If the government wants the market to deliver housing growth it needs to deliver more than good intentions”
The government hopes that greater clarity as to who ultimately owns overseas companies owning land in the UK will improve transparency and confidence and in turn make it significantly harder for the proceeds of crime to be laundered through the property market. As such the government is keen to press on and has made it clear that a draft bill can be expected later this year with a view to the register going live in early 2021.
The questions around these reforms are not just academic. Even with the best of intentions, stakeholders are already struggling to navigate their way through uncertain waters. For example, we are seeing transactions stalling as parties re-evaluate how best to structure and value deals in light of the proposed changes to residential leasehold.
If the government wants the market to deliver housing growth it needs to deliver more than good intentions. Detail and certainty are the order of the day.