Leasehold Reform (Ground Rent) Bill [HL]

Written evidence submitted by Justin Neal, Strategy & Planning Director, Homewise Limited (LRGRB06)

LEASEHOLD REFORM (GROUND RENT) BILL

1. Executive Summary:

· Introduction to Lifetime Leases offered by Homewise Limited;

· Requirement to exclude lifetime leases for the ground rent ban;

· Suggest Bill amendments

2. Introduction

Homewise Limited offer lifetime leases that are not regulated financial products

Homewise enable older homeowners to move out of unsuitable homes by offering a lifetime lease on their next home and have been operating under this brand for 14 years. The lifetime lease enables over 60s to move to suitable homes and locations and, if they wish, to raise equity to help finance their retirement. This product also has the wider benefit to the property market by releasing larger family homes.

Homewise purchase the property the customer wishes to move to and sells them a lifetime lease which grants them lifetime occupation. The lifetime lease ends upon the life tenants’ demise or permanent move into long-term care. This is not a regulated equity release product, i.e., it does not involve purchasing the customers’ existing property and releasing equity.

Homewise do not currently charge a rental on the lifetime lease, however, through future product development this may be a suitable option they wish to pursue and to offer their clients. Based on the current draft of the Bill, it would unfairly remove Homewise’s ability to do this in the future.

3. Requirement

The problem with the Leasehold Reform (Ground Rent) Bill as currently drafted is that it creates an exemption from the ban on ground rents for equity release and home reversion plan providers who offer regulated products via lifetime leases but no exemption for other operators such as Homewise who offer lifetime leases that are not regulated products. This introduces an unjustified market distortion and could put Homewise and other providers at a competitive disadvantage if their ability to develop products involving lifetime leases is limited in a way that does not apply to those who offer regulated financial products. We believe the exemption granted to home reversion plan providers is due to the nature of the lease being granted (a lifetime lease) and not due to whether the product is a regulated or non-regulated product.

It seems to us that if the Government bans "long leases" at a ground rent, the definition of long leases that are exempt should be the same as in the 1967 and 1993 Acts so that all lifetime lease products, whether using equity release or home reversion products or otherwise, will not be within the ban on ground rents if they can be terminated on not more than three months’ notice following the death of the owner and during the term of the lease they cannot be assigned or underlet. Whether the scheme is regulated or unregulated is not relevant for these purposes.

It is important to note that the same point applies equally to long leases of houses which the Government also has indicated will be banned. A similar exception for lifetime leases will be needed in that legislation as well when it is brought forward to ensure that lifetime lease products, equity release and home reversion plans can be used in respect of houses as well as flats. Ideally, the same definitions and exceptions should be used in both sets of legislation.

4. Suggested Amendments

The position of Homewise and similar providers (present or future) would be protected by

1. adding an additional sub-clause to clause 2(9) of the Bill:

"(c) It is granted by a provider to a lifetime owner pursuant to a lifetime lease arrangement."

2. Inserting a new clause 2(11) of the Bill:

"(11) A "lifetime lease arrangement" is an arrangement in relation to which the following conditions are met-

(a) a person (the "provider") buys a qualifying interest, or an undivided share of a qualifying interest, in land, and

(b) the arrangement provides for the grant of a long lease by the provider to another person (the "lifetime lease owner") that is terminable by notice after the death of the lifetime lease owner or, if the lifetime lease owner is more than one person, the death of the last surviving lifetime lease owner, if-

(i) the notice is capable of being given at any time after the death of the lifetime lease owner or, if the lifetime lease owner is more than one person, the death of the last surviving lifetime lease owner;

(ii) the length of the notice is not more than three months; and

(iii) the terms of the lease preclude both-

(aa) its assignment otherwise than by virtue of section 92 of the Housing Act 1985 (assignments by way of exchange), and

(bb) the sub-letting of the whole of the premises comprised in it."