Ministers are facing calls to prevent leaseholders being threatened with losing their home over unpaid charges. Under current laws, branded “draconian” by campaigners, a property can be repossessed if the leaseholder owes as little as £350.
There is cross-party support for scrapping the practice of forfeiture in the Leasehold Reform Bill, which returns to the Lords on Wednesday. The government says it recognises the issue needs to be tackled.
Last month, Housing Secretary Michael Gove said forfeiture was “wrong” and ministers would work with other parties in the Lords to find the best way of addressing this.
The BBC News Service is reporting that the Leasehold Bill, which is making its way through Parliament, would ban the creation of new leasehold houses in England and Wales, and make it easier for leaseholders to buy their freehold.
Under the current system, leaseholders often have to pay ground rent to a freeholder, as well as service charges to maintain the building.
A freeholder can apply to repossess a property if there is a breach of the lease, for example not paying the ground rent or service charge.
There are some protections for leaseholders. For example, if an alleged breach is not agreed by the leaseholder, the landlord has to apply to a tribunal or court to determine the breach before they can start forfeiture action.
However, campaigners say the threat of losing their home can be enough to persuade many leaseholders to pay up before the legal process is formally under way, even if they believe charges are unreasonable.
Harry Scoffin, who founded campaign group Free Leaseholders, said the idea someone could lose a flat worth £350,000 for a debt as small as £350 was “obscene”.
He argued there was already a mechanism to claim back unpaid service charge through the county courts.
The Residential Freehold Association said it supported the reform of forfeiture to prevent landlords making “a windfall profit”.
The association said its members “never want to use forfeiture to repossess a property, and hardly ever do”.
However, a spokesman said the threat of forfeiture was necessary “to prevent serious lease breaches” and ensure funds were available to run buildings.
Katie Kendrick, co-founder of the National Leasehold Campaign, said the number of forfeiture cases which make it to court was relatively low, but it was used daily as a threat to get leaseholders to pay “unreasonable” charges.
She said it was disappointing MPs had voted down a Labour proposal in the Commons to abolish forfeiture in the Leasehold Bill, but she hoped the change would be introduced in the Lords.
Conservative peer and former minister Lord Young said he hoped the government would put forward its own amendment to scrap forfeiture, adding: “If they don’t, I certainly will.”
Labour said it would table another proposal in the Lords to abolish forfeiture and would be working with other parties to come to an agreement on the best way to address the issue.
Baroness Taylor, the party’s shadow housing spokeswoman, said: “We will be saying to the government, if you don’t want to completely scrap forfeiture, then you need to come forward with an alternative.”