The Leasehold and Freehold Reform Bill
The Leasehold and Freehold Reform Bill is currently passing through the Parliamentary process before it becomes an Act. It was introduced to Parliament on 27 November 2023.
Given the importance of the proposed legislation we’re writing a series of related articles. First, here’s an outline of what the Government says it intends to achieve, writes Zah Azeem, Partner at Wimbledon based Chartered Surveyors.
The Leasehold and Freehold Reform Bill will deliver on the government’s manifesto commitments on leasehold reform. The Bill will make the long-term and necessary changes to improve homeownership for millions of leaseholders in England and Wales, by making it cheaper and easier for more leaseholders to extend their lease, buy their freehold and take over management of their building.
The government is committed to promoting fairness and transparency for leaseholders and ensuring that consumers are protected from abuse and poor service. The government asked the Law Commission to review certain areas of leasehold law in 2017. Since then, the government has committed to legislate on a range of policy areas through a number of consultation responses.
The Leasehold Reform (Ground Rent) Act 2022 formed the first part of the government’s programme of leasehold reform. The Act put an end to ground rents for new long residential leases in England and Wales.
Overview of Bill measures
The Bill will make long-term changes to home ownership for millions of leaseholders in England and Wales by empowering leaseholders and improving their consumer rights. The Leasehold and Freehold Reform Bill will as proposed:
Increase the standard lease extension term for houses and flats to 990-years (up from 90 years in flats, and 50 years in houses), with ground rent reduced to a peppercorn (zero financial value) upon payment of a premium. This will make sure that leaseholders can enjoy secure, ground rent-free ownership of their properties for years to come, without the need for repeated lease extensions in the future.
Remove the ‘marriage value’ element of the valuation calculations, which is required for leases with less than 80 years unexpired.
Remove the requirement for a new leaseholder to have owned their house or flat for 2 years before they can benefit from these changes – so that more leaseholders can exercise their right to the security of freehold ownership or a 990-year lease extension as soon as possible.
Increase the 25% ‘non-residential’ limit preventing leaseholders in buildings with a mixture of homes and other uses such as shops and offices, from buying their freehold or taking over management of their buildings – to allow leaseholders in buildings with up to 50% non-residential floorspace to buy their freehold or take over its management.
Make buying or selling a leasehold property quicker and easier by setting a maximum time and fee for the provision of information required to make a sale (such as building insurance or financial records) to a leaseholder by their freeholder (known as ‘landlords’).
Require transparency over leaseholders’ service charges – so all leaseholders receive better transparency over the costs they are being charged by their freeholder or managing agent in a standardised comparable format and can scrutinise and better challenge them if they are unreasonable.
Replace buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees – to stop leaseholders being charged exorbitant, opaque commissions on top of their premiums.
Extend access to “redress” schemes for leaseholders to challenge poor practice. We will require freeholders who manage their property to belong to a redress scheme so leaseholders can challenge them if needed.
Scrap the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.
Grant freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders – by extending equivalent rights to transparency over their estate charges and to challenge the charges they pay by taking a case to a Tribunal, just like existing leaseholders.
Build on the legislation brought forward by the Building Safety Act 2022, ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work – protecting leaseholders by extending the measures in the Building Safety Act 2022 to ensure it operates as intended.
Ban the sale of new leasehold houses so that – other than in exceptional circumstances – every new house in England and Wales will be freehold from the outset.
As I said, significant changes. Not all of them helpful, and many will bring unintended consequences which, in our opinion, have not been fully thought through. If you would like to discuss Leasehold and Frehold Reform or Valuation and how this might affect your property, please contact me direct via email at zah@scrivenertibbatts.co.uk or call 020 8947 7040.
