housing Commonhold and Leasehold Reform Act 2002 Leasehold Houses Insurance other than with the landlord s nominated or approved insurer (section 164)

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1 Commonhold and Leasehold Reform Act 2002 Leasehold Houses Insurance other than with the landlord s nominated or approved insurer (section 164) Consultation on the prescribed form of tenant s notice of cover housing

2 Office of the Deputy Prime Minister Eland House Bressenden Place London SW1E 5DU Telephone Internet service Crown copyright Copyright in the typographical arrangement and design rests with the Crown. This publication (excluding the Royal Arms and logos) may be reproduced free of charge in any format or medium provided that it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright with the title and source of the publication specified. Further copies of this report are available from: ODPM Free Literature PO Box 236 Wetherby West Yorkshire LS23 7NB Tel: Fax: Textphone: odpm@twoten.press.net Published by the Office of the Deputy Prime Minister. Printed in the UK, March 2003 on material containing 75% post-consumer waste and 25% ECF pulp. Product code 03 HC 01201

3 CONTENTS INTRODUCTION CHAPTER 1 Background 7 CHAPTER 2 Provisions in the Commonhold and Leasehold Reform Act ANNEX A Draft Regulations prescribed form of notice of cover 10 ANNEX B List of major interest groups being consulted 16 ANNEX C Consultation criteria 17 ANNEX D Draft Regulatory Impact Assessment 18 ANNEX E Summary of Questions 24

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5 Introduction 1. The Commonhold and Leasehold Reform Act ( the Act ), which received Royal Assent on 1 May, is intended to address the difficulties of long leasehold tenure and the imperfections of the remedies available under the law as it stands. One such difficulty encountered by leaseholders of houses is the requirement under the terms of the lease for the leaseholders to insure the house with an insurer nominated or approved by their landlord. 2. This problem does not usually arise with long leasehold flats where the landlord will normally be responsible under the lease for insuring the whole building rather than the leaseholders. The landlord will therefore normally insure the whole building by way of a single buildings policy and leaseholders will contribute towards that cost through service charges. 3. The Act will give long leaseholders of houses who have in their lease the right to arrange their own buildings insurance cover for the house, provided certain conditions are met. 4. The Act 2 sets out the conditions that need to be satisfied, the time limits within which a notice of cover must be served on the landlord and the content of the notice which must be supplied by the leaseholder. The Act also provides the power to prescribe additional information that must be included in the notice of cover. 5. A notice of cover must be in a form prescribed by Regulations made by the Secretary of State (in relation to England) and the National Assembly of Wales (in relation to Wales). 6. This paper seeks views on the additional information to be included in the notice and the form of the notice as prescribed in the draft Regulations, attached at Annex A. 7. The Government would be glad to receive any comments on the paper by 8 August They should be sent to: Ian Fuell HPS Division Office of the Deputy Prime Minister Zone 2/J6 Eland House Bressenden Place London SW1E 5DU Telephone: to: leasehold.consultation@odpm.gov.uk Please contact Ian Fuell on if you have any questions relating to this paper. 1 Initial guidance on the Act can be obtained by contacting Ian Fuell at Zone 2/J6, Eland House, Bressenden Place, London, SW1E 5DU. (Tel ). 2 Section 164 of the Commonhold and Leasehold Reform Act

6 Commonhold and Leasehold Reform Act This consultation paper has been sent to various organisations and representatives of major interest groups (see Annex B). Respondents are invited to inform us of any other organisation or person that should be made aware of this paper. 9. The draft Regulations at Annex A extend to England only. The National Assembly for Wales will make their own regulations in relation to Wales and will consult separately. This consultation paper is of greatest relevance to leaseholders and landlords of leasehold houses. However, we would also welcome the views of other professionals and organisations with an interest in the leasehold sector. Further copies of the consultation paper can be obtained from ODPM, PO Box 236, Wetherby, West Yorkshire, LS23 7NB. Tel: or from the internet: The Government may wish to publish responses to this paper in due course or deposit them in Department libraries or the libraries of the Houses of Parliament. If this is done all responses received will be published or deposited, unless a respondent specifically asks for his or her response to be treated as confidential. Confidential responses will, nevertheless, be included in any statistical summary of numbers of comments received and views expressed. 11. This consultation paper conforms to the criteria set out in the code of Practice on Written Consultation (a summary of these is at Annex C). Any complaints relating to the consultation process should be referred to Siobhan Benita, Consultation Co-ordinator, Office of the Deputy Prime Minister, Room 3.17, 26 Whitehall, London, SW1A 2WH (tel: ). You can contact her by at siobhan.benita@odpm.gov.uk 6

7 CHAPTER 1 Background 12. There are around 800,000 leasehold houses in England, around three-quarters of which are found in the North of England. Long leases on houses usually contain a clause requiring the leaseholder to insure the building against fire and other damage risks with either a specified insurer or an insurer nominated by the landlord. 13. Due to their relatively small interest in the property and the fact that they do not have to pay the premiums the freehold landlord may have little or no incentive in choosing an insurer which provides best value for money. In addition, such clauses also give landlords the opportunity to make money by way of commission received from the chosen insurer. The higher the premium, the higher the commission for the landlord. This practice of nominating insurers who provide the landlord with the highest commission is particularly prevalent in cases where a landlord has a large portfolio of leasehold houses. 14. Paragraph 8 of the Schedule to the Landlord and Tenant Act 1985 does enable leaseholders who are subject to nominated insurer clauses, to challenge the landlord s choice of insurer at a Leasehold Valuation Tribunal on the grounds that the insurance is unsatisfactory in any respect or that the premiums are excessive. A fee is payable to the tribunal for this and, while these fees are under active consideration with a view to making them more proportionate to the application and sums involved, the fee for this type of application is currently 300. Few leaseholders have therefore made use of this remedy. 15. Following evidence indicating freeholds of low value houses were being bought up in order to exploit the nominated insurer clauses, section 164 was included in the Commonhold and Leasehold Reform Act 2002 to remedy the situation. 16. In order to satisfy the requirements of s.164 of the Act leaseholders will need to serve a notice of insurance cover on their landlord, and s.164(6) requires that the notice be in a prescribed form. 7

8 Commonhold and Leasehold Reform Act 2002 CHAPTER 2 Provisions in the Commonhold and Leasehold Reform Act Section 164 of the Act provides new rights for tenants of leasehold houses who are required by the terms of their lease to insure the house with an insurer nominated or approved by their landlord. 18. Section 164(2) describes the conditions that need to be met in order for the tenant not to have to insure with the landlord s nominated or approved insurer, as follows: (a) the house is insured under a policy of insurance issued by an authorised insurer; (b) the policy covers the interests of both the landlord and the tenant; (c) the policy covers all the risks which the lease requires be covered by insurance provided by the landlord s insurer; (d) the amount of the cover is not less than that which the lease requires to be provided by such insurance, and (e) the tenant satisfies subsection 164(3). 19. Sections 164(3) and (4) explain the time limits within which the tenant must serve the notice of cover on the landlord and the relevant date, as follows: the tenant (a) must have given a notice of cover to the landlord before the end of the period of fourteen days beginning with the relevant date 3, and (b) if (after that date) he has been requested to do so by a new landlord 4, must have given a notice of cover to him within the period of fourteen days beginning with the day on which the request was given. 8 3 If the policy has not been renewed the relevant date is the day on which it took effect, and if it has been renewed it is the day from which it was last renewed. 4 A person is a new landlord on any day if he acquired the interest of the previous landlord under the lease on a disposal made by him during the period on one month ending with that day.

9 Provisions in the Commonhold and Leasehold Reform Act Section 164(5) sets out the contents of the notice of cover which is to be supplied to the landlord. These are as follows: The name of the insurer. The risks covered by the policy, and The amount and period of the cover. 21. Section 164(5) also provides that the notice shall include such additional information as may be prescribed. 22. Section 164(6) states that the notice of cover must be in the prescribed form. Additional information included in the prescribed notice of cover 23. In addition to the content described in paragraph 20 above, we propose to prescribe the need for the following additional information: The name and registered address of the insurer. The insurance policy number. The address of the house insured under the policy. How often premiums are payable under the policy. The amount of any excesses of the policy. Q.1. Do you agree that additional particulars to those specified in section 164 of the Act should be prescribed in the notice? Q.2. Do you agree with the additional information that we propose to include in the notice (paragraph 23 above)? Q.3. Do you agree that the checklist at paragraph 9 of the Schedule to the draft regulations (annex A) includes all matters that are likely to be covered by the terms of a lease? Application of right and Commencement 24. Rights under section 164 will take effect on the date that the provision is commenced. We also propose that there should be a lead-in time of 3 months from the making of the commencement order to the commencement date for this particular provision to allow leaseholders and landlords to prepare for its introduction. Q.4. Do you agree with the 3 month lead-in period? 9

10 Commonhold and Leasehold Reform Act 2002 ANNEX A Draft Regulations Draft of STATUTORY INSTRUMENTS 2003 No. LANDLORD AND TENANT Leasehold Houses (Notice of Cover of Insurance) (England) Regulations 2003 Made 2003 Laid before Parliament 2003 Coming into force 2003 The Secretary of State, in exercise of the powers conferred by section 164(5)(d) and (6)(a) of the Commonhold and Leasehold Reform Act 2002 (a), hereby makes the following Regulations: CITATION AND COMMENCEMENT 1. These Regulations may be cited as the Leasehold Houses (Notice of Cover of Insurance) (England) Regulations 2003 and shall come into force on. APPLICATION 2. These Regulations apply in respect of houses in England only. (a) c.15. Prescribed has the meaning given by section 164(10) of the Commonhold and Leasehold Reform Act By virtue of section 179(1) of that Act the Secretary of State is the appropriate authority as respects England. The powers conferred by section 164(5)(d), (6)(a) and (10) of that Act are exercisable, as respects Wales, by the National Assembly for Wales. 10

11 Draft Regulations ADDITIONAL CONTENT OF NOTICE OF COVER 3. A notice of cover (b) shall contain (in addition to the particulars referred to in paragraphs (a) to (c) of subsection (5) of section 164 (insurance otherwise that with the landlord s insurer) of the Commonhold and Leasehold Reform Act 2002): (a) the name and registered address of the insurer; (b) the insurance policy number; (c) the address of the house insured under the policy; (d) how often the premiums are payable under the policy; (e) the amount of any excesses of the policy; (f) the information provided in the notes to the form set out in the Schedule to these Regulations. FORM OF NOTICES OF COVER 4. A notice of cover shall be in the form set out in the Schedule to these Regulations or in a form substantially to the same effect. Signed by authority of the First Secretary of State 2003 Parliamentary Under Secretary of State Office of the Deputy Prime Minister (b) See section 164(3) of the Commonhold and Leasehold Reform Act

12 Commonhold and Leasehold Reform Act 2002 SCHEDULE Regulation 4 FORM COMMONHOLD AND LEASEHOLD REFORM ACT 2002 Notice of Cover of Insurance To [name and address of landlord] (see note 1) 1. I am the tenant of the house at [address]. 2. The house is insured by an insurance policy taken out with [name and registered address of insurer] [who is an authorised insurer in accordance with section 164(10) of the Commonhold and Leasehold Reform Act 2002] (see note 2). 3. The policy number is.. 4. The insurance policy is for [specify amount] for the period of [specify period in years or if less than one year in months]. (see note 3) 5. Premiums of the insurance policy are payable [state how often premiums are payable] 6. The excesses of the policy are. 7. The policy has/ has not been renewed. [delete as necessary] (see note 4). 8. The policy took effect on [date]./ The policy was renewed on [date]. [delete as necessary]. 12

13 Draft Regulations 9. The following risks are covered by the policy: (a) fire (b) lightening (c) explosion (d) earthquake (e) collision by aircraft or other aerial devices (or articles dropped from them) (f) collision by any vehicle (or articles dropped from them) (g) collision by animals (h) storm (i) flood (j) falling trees or branches, telegraph poles or lighting standards (k) riot, civil commotion, strikes, labour or political disturbances (l) malicious damage (m) theft or attempted theft (n) subsidence or ground heave of the site on which the buildings stand (o) landslip [delete any risks not covered by the policy] 10. In addition to the risks set out above, the following risks specified in the lease, are covered by the policy (see note 5). 11. This policy covers the risks of both the landlord and the tenant. [signature] [insert date] 13

14 Commonhold and Leasehold Reform Act 2002 Notes 1. If the notice is to be sent by post it may be addressed to the landlord at the address last given by the landlord to the tenant or if no such address has been given the address contained in any demands for rent (see section 164(8) of the Commonhold and Leasehold Reform Act 2002), unless the landlord has given to the tenant a different address in England at which he wishes to be given any such notice (see section 164(9) of the Commonhold and Leasehold Reform Act 2002). 2. Section 164 of the Commonhold and Leasehold Reform Act 2002 provides that subject to certain conditions set out in subsection (2) of that section, a tenant of a house is not required to take out insurance with the landlord s insurer. One of those conditions is that the insurance taken out by the tenant is with an authorised insurer as defined in section 164(10). 3. The amount of cover of the insurance must be no less than that which is required to be provided by such insurance under the terms of the lease (see section 164(2)(d) of the Commonhold and Leasehold Reform Act 2002). 4. Where the policy has been renewed the tenant must give this notice to the landlord 14 days from the last renewal. Where it has not been renewed the tenant must give the landlord notice within 14 days of the date that the policy took effect. The tenant must also provide a notice of cover to any new landlord who, within a month of acquiring the previous landlord s interest, so requests. The policy of insurance must cover all risks which the lease requires to be covered by the landlord s insurer (see section 164(2)(c) of the Commonhold and Leasehold Reform Act 2002). 14

15 Draft Regulations EXPLANATORY NOTE (This note is not part of the Order) Where a tenant of a long leasehold house insures, in accordance with section 164 of the Commonhold and Leasehold Reform Act 2002, the house with an insurer other than one nominated or approved by their landlord, he is required to serve on the landlord a notice of cover. These Regulations prescribe additional contents of and the form for the notice of cover. 15

16 Commonhold and Leasehold Reform Act 2002 ANNEX B List of Major Interest Groups being consulted Association of British Insurers (ABI) Advice in Mediation Service (AIMS) Association of London Government (ALG) Association of Residential Managing Agents (ARMA) Association of Retirement Housing Managers (ARHM) British Property Federation (BPF) Coalition for the Abolition of Residential Leasehold (CARL) Council of Mortgage Lenders (CML) Department of Trade and Industry Small Business Service (SBS) Federation of Private Residents Associations (FPRA) The Housing Corporation Independent Housing Ombudsman (IHO) Leasehold Advisory Service (LEASE) The Law Society The Leasehold Enfranchisement Association (LEA) Leasehold Reform Professional Committee (LRPC) Local Government Association (LGA) London Forum for Council Leaseholders Associations (LFCLA) The Royal Institute of Chartered Surveyors (RICS) The above list is not necessarily a definitive list of major groups and organisations that have been consulted. However, if there are other organisations which ought to see a copy of this paper, but which are not on the above list, please contact us with details. 16

17 ANNEX C The consultation criteria The criteria in this code apply to all UK national public consultations on the basis of a document in electronic or printed form. They will often be relevant to other sorts of consultation. Though they have no legal force, and cannot prevail over statutory or other mandatory external requirements (e.g. under European Community law), they should otherwise generally be regarded as binding on UK departments and their agencies, unless Ministers conclude that exceptional circumstances require a departure. The criteria should be reproduced in consultation documents, with an explanation of any departure, and confirmation that they have otherwise been followed. 1. Timing of consultation should be built into the planning process for a policy (including legislation) or service from the start, so that it has the best prospect of improving the proposals concerned, and so that sufficient time is left for it at each stage. 2. It should be clear who is being consulted, about what questions, in what timescale and for what purpose. 3. A consultation document should be as simple and concise as possible. It should include a summary, in two pages at most, of the main questions it seeks views on. It should make it as easy as possible for readers to respond, make contact or complain. 4. Documents should be made widely available, with the fullest use of electronic means (though not to the exclusion of others), and effectively drawn to the attention of all interested groups and individuals. 5. Sufficient time should be allowed for considered responses from all groups with an interest. Twelve weeks should be the standard minimum period for a consultation. 6. Responses should be carefully and open-mindedly analysed, and the results made widely available, with an account of the views expressed, and reasons for decisions finally taken. 7. Departments should monitor and evaluate consultations, designating a consultation coordinator who will ensure the lessons are disseminated. 17

18 Commonhold and Leasehold Reform Act 2002 ANNEX D Draft Regulatory Impact Assessment: Leasehold Houses: Insurance otherwise than with a nominated insurer: prescribed form of notice of cover Title 1. Residential Leasehold Reform Prescribed form and content of tenant s notice of cover. Purpose and intended effect THE ISSUE AND OBJECTIVE Issue 2. There are around 800,000 leasehold houses in England 5. They usually contain a clause in the lease requiring the leaseholder to insure the building against fire and other damage risks with either a specified insurer or an insurer nominated from time to time by the landlord. Although the leaseholder has the greatest financial stake, this enables the landlord to protect their interest in the property. 3. Around three-quarters of the 800,000 leasehold houses are found in the North of England. Following evidence received indicating that freeholds of low value houses were being bought up in order to exploit the nominated insurer clauses, section 164 was inserted into the Commonhold and Leasehold Reform Act 2002 to address the situation Of course, we accept that only a minority of landlords of leasehold houses exploit their leaseholders where insurance is concerned. Those landlords that do not should therefore have nothing to fear from this provision Survey of English Housing, 2000/1. 6 The main body of evidence received has been in letters from MPs on behalf of constituents, and from leaseholders themselves.

19 Draft Regulatory Impact Assessment: Leasehold Houses: Insurance otherwise than with a nominated insurer: prescribed form of notice of cover Objective 5. We propose to implement section 164 of the 2002 Act to allow long leaseholders of houses to take out their own building insurance. We also propose to make regulations under powers contained in the Act which would prescribe the form and content of the notice of cover to be served by the leaseholder on the landlord for this purpose. This is because the notice must be in the prescribed form, which will be set out in regulations prescribed by the appropriate national authority. RISK ASSESSMENT 6. Without this right the ability for landlords to exploit leaseholders of houses over building insurance will remain. While we have received reports that some exploitation of the system is occurring, it has proved difficult to measure the exact extent of the problem. However, with around 800,000 leasehold houses in England, and an average annual expenditure per household on structural insurance 7 of 168, the potential for exploitation of the current system is large. OPTIONS Options identified 7. Option 1: Do nothing 8. Option 2: Implement section 164 of the 2002 Act and prescribe the form and content of the tenants notice of cover to be used. Issues of equity and fairness 9. Option 2 is intended to make the system of insuring a leasehold house, in which the leaseholder has the greater stake in most cases, fairer. The current situation, i.e. option 1, is a barrier to competition with leaseholders not having the freedom to make a choice between the insurer nominated or approved by their landlord, and a policy of the leaseholder s choice. However, it must be recognised that some landlords may be able to negotiate better insurance terms for their properties dependent on the size of their portfolio, such that the leaseholder would benefit from economies of scale. BENEFITS Benefits identified 10. Option 1: Leaseholders None. Landlords Would remain able to exploit the nominated insurer clauses in leases of houses and also obtain commission on polices in some cases. However, it is difficult to place a value derived by a landlord from having a more complete level of insurance cover offered by different insurance policies. Annex 1 estimates landlords may be benefitting from exploiting the current law in the range 65,000 4m depending on the level of abuse, and how widespread it is. Over 30 years this indicates an NPV 8 in the range 1m 56m. 7 Insurance trends, April Figures for 2000/2001 across the UK. 8 All Net Present Values are discounted at six percent. 19

20 Commonhold and Leasehold Reform Act 2002 Conversely, landlords are able to ensure that their interest in the property is appropriately covered a leaseholder might be tempted to take the cheapest insurance, not necessarily the one offering the best value. Insurers Annex 1 also shows that insurers may be benefiting in the range 30, ,000 per annum, or a 30 year NPV of 0.5m 11m. A further, unquantified benefit to insurance companies is the possibility that the lack of competition arising from the landlord nominating the insurer leads to increased revenues from buildings insurance. However, this is likely to be a simple transfer from the leaseholder to the insurer rather than an increased benefit to society. 11. Option 2: Leaseholders Would be allowed to shop around for insurance and benefit from the estimated 1.3m 56m that would be brought about by being able to gain best value for money over a thirty-year period. It may be noted that Annex 1 assumes that leaseholders under option 2 would choose a policy with an average premium level. In reality, the benefits might be greater to them as increased competition from these approximately 800,000 households may force the average premium down. This is an efficiency improvement over the current situation, beneficial to all in society. Landlords May benefit from the leaseholders bearing the cost of exercising their choice. As with paragraph13 below, this benefit may be expected to cancelled out by the compliance cost of checking the insurance cover was adequate. There is also a risk that landlords will lose any economies of scale, and that higher premiums could result for those leaseholders that do not exercise the right. COMPLIANCE COSTS Business sector affected 12. There are no actual compliance costs for the business sector. Other compliance costs 13. Option 1: None 14. Option 2: Leaseholders will need to (i) satisfy the statutory requirements, and (ii) complete a prescribed form of notice if they believe they can obtain insurance on more favourable terms than that required under the nominated insurer clause in the lease, and wish to exercise their right. Landlords will incur minor costs in checking the form to ensure that their interest in the property is protected and the property is adequately insured, and in seeking amendments where the property is insured as part of a block policy. Consultation with Small Business 15. Some landlords of leasehold houses can be considered as small business. There are also a number of companies that manage fairly large portfolios of leasehold houses. We will consult with the small business service on our proposals. Other costs 16. We do not consider that any other significant costs will be incurred. 20

21 Draft Regulatory Impact Assessment: Leasehold Houses: Insurance otherwise than with a nominated insurer: prescribed form of notice of cover Competition Assessment 17. We have assessed the impact of the proposals against the Office of Fair Trading checklist criteria and there is unlikely to be a negative competition impact as a result. The proposals will apply to all leaseholders of houses, and should have the effect of replacing what is an anti-competitive situation with a more competitive one leading to an efficiency improvement and a net benefit to society. SUMMARY 18. In light of the above assessment we recommend option 2 as set out in paragraph 7 above. This option will address an area of residential leasehold within which exploitation can take place. However, a number of scenarios are assumed and a range of values estimated for purposes of Annex 1 in the absence of detailed information on the extent of exploitation. We therefore welcome the views of consultees on these in particular. MONITORING AND REVIEW 19. We will keep these arrangements under review and make changes if necessary. However, it may take some time before all those leaseholders of houses that may be able to take advantage of the new right, become aware of it. It may therefore be a while before any meaningful conclusions can be reached on whether the new arrangements are having the desired effect. A key indicator in this will, however, be the number of complaints/letters received by the Department indicating that landlords are either incorrectly or inadvertently, invoking the nominated insurer clause in leases. 21

22 Commonhold and Leasehold Reform Act 2002 Annex 1 Estimation of the value of exploitation of the current law In the absence of information on the numbers of landlords exploiting the current law, a number of scenarios are assumed, and a range of values estimated, for the monetary level of any exploitation. Of course, it is not being suggested that exploitation is common across the sector as a whole, and the following figures are to some extent hypothetical. However, we would welcome your comments upon them. Figures from Insurance Trends, April 2002, show the mean level of buildings insurance paid by households in 2000/2001 for each region, as well as the standard deviation. From this, exploitation of the system can be defined. We assume that leaseholders, left to their own devices, would select the mean insurance premium level. We then assume the following scenarios: A) That landlords nominate a buildings insurance policy that has a premium at the 95% level 9, i.e. that 95% of insurance premia are cheaper, and appropriate the difference between the mean and that the 95% level. B) That landlords nominate an insurance policy as with A, but appropriate two-thirds of this as commission, with the insurance company gaining the one-third remainder as legitimate revenue. C) That landlords nominate an insurance policy, with a premium well above the norm for the region, such that the leaseholders premium is twice as far above the mean as in scenario A. In this instance the insurance firms gain one-sixth of this additional amount, giving them the same amount as in scenario B. The landlord appropriates the remaining five-sixths as commission. Table 1 shows the level of insurance premium charged to leaseholders that would not have been under Option 2, if abuse were common across all leasehold houses. It is not being suggested that this is the case. The proportions shall be subject to sensitivity analysis in Table We can be 95% certain that the true mean lies within the range: the mean +/- the difference between the mean and the 95 % level.

23 Draft Regulatory Impact Assessment: Leasehold Houses: Insurance otherwise than with a nominated insurer: prescribed form of notice of cover Table 1 Mean buildings insurance Number of premium 95% leasehold Scenario Scenario Scenario Region per annum level houses A B C North , m 1.1m 2.2m Yorks & H , m 1.0m 2.0m North West , m 5.1m 10.2m E. Mids , m 0.1m 0.2m W. Mids , m 0.5m 1.0m E. Anglia , m 0.4m 0.7m Gtr. London , m 0.8m 1.5m Rest of SE , m 0.4m 0.9m SouthWest , m 0.4m 0.8m Average/Total , m 9.8m 19.5m Table 2 shows the benefit to the three parties from doing nothing, i.e. Option 1. It shows the results for different levels of abuse, assuming that it occurs for 1%, 5%, 10% and 25% of leasehold houses. Table 2 Party Level of abuse Scenario A Scenario B Scenario C Insurer 1% 0 32,566 32,566 5% 0 162, ,831 10% 0 325, ,662 25% 0 814, ,155 Leaseholder 1% 97,699 97, ,397 5% 488, , ,986 10% 976, ,986 1,953,972 25% 2,442,465 2,442,465 4,884,930 Landlord 1% 97,699 65, ,831 5% 488, , ,155 10% 976, ,324 1,628,310 25% 2,442,465 1,628,310 4,070,775 The benefits from option 2 are the exact inverse of the above figures. 23

24 Commonhold and Leasehold Reform Act 2002 ANNEX E Summary of Questions Q.1. Do you agree that additional particulars to those specified in section 164 of the Act should be prescribed in the notice? Q.2. Do you agree with the additional information that we propose to include in the notice in paragraph 23? Q.3. Do you agree that the checklist at paragraph 9 of the Schedule to the draft regulations (annex A) includes all matters that are likely to be covered by the terms of a lease? Q.4. Do you agree with the 3 month lead in period? 24

25 Further copies of this guidance are available from: Office of the Deputy Prime Minister ODPM Free Literature PO Box 236 Wetherby West Yorkshire LS23 7NB Tel: Fax: Or via the ODPM web site: