The Leasehold and Freehold Reform Bill - A New Dawn or a Missed Opportunity?

At the time of typing, The Leasehold and Freehold Reform Bill (‘the Bill’) has just passed through the House of Commons and the second reading of the Bill in the House of Lords has just begun.

The aim of the Bill is to ‘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’.  So far, so good.

Conveyancers up and down the land have been crying out for reform to this area of law for decades. The Government itself has pronounced leasehold to be outdated and ‘feudal’ and proclaimed last year that it would be seeking ‘the effective destruction of the leasehold system’.  

One solution to leasehold reform is commonhold tenure, which was introduced in England and Wales in 2004 to, putting it mildly, a lukewarm reception. This is evidenced by there currently being only 159 commonhold units in both countries and there are clearly some issues that need to be addressed before commonhold ownership really takes off.

While one effect of the Bill could be an increase in the uptake of commonhold units, let’s take a look at some of the key changes being proposed:-

1. Leasehold Houses – Various amendments have been introduced by the Government to 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.
2. Ground Rents – There has been consultation on the future of ground rents in existing leases, which ended on January 17^th 2024. The possibilities are:

• No ground rent to be charged other than a peppercorn;
• The ground rent will be the same as the initial rent granted in the original lease;
• The ground rent will be capped at a maximum (proposed to be £250.00 per annum);
• The ground rent will be set as the rent in existence when the Bill receives the Royal Assent;
• The ground rent will be capped at a maximum (proposed to be 0.1% of the value).

3. Building Safety Act 2022 – Amendments to the must criticised Building Safety Act 2022 have been introduced, which would constitute preventative and precautionary safety measures, preventing or reducing the likelihood of fire or collapse, reducing its severity and preventing or reducing harm to people in or around the building.
4. Lease Extensions – The standard lease extension term for houses and flats would be increased to 990-years (up from 90 years for flats, and 50 years for houses). It is also proposed that ‘Marriage Value’ is done away with in addition to the requirement that a new leaseholder must have owned their property for two years before they can benefit from these changes. This will make lease extensions cheaper and more accessible.
5. Speed up the conveyancing process – By setting a maximum time and fee for the provision of information required to conduct a sale. This would, for example, affect landlords and management companies so they would be obliged to provide information more readily.
6. Administration Charges – Currently, the leaseholders of flats can question the reasonableness of administration charges in tribunal. Leaseholders of houses and freeholders who are subject to these cannot do so. It is proposed that this will change under the terms of the Bill.
7. Estate Management Charges – Under Sections 18-30 Landlord and Tenant Act 1985, leaseholders in flats and houses can question the reasonableness of service charges in tribunal. In the future, owners of freehold houses within estate management schemes will have the same rights and also fixed service charges will come within the provision.

The above changes are a starting point and while there are solutions to many long-standing problems, there are also a number of questions that remain unanswered. It is great, for example, that Section 121 of the Law of Property Act 1925 will not apply to fixed sum rentcharges but what about estate rentcharges? And what about banning forfeiture for long leasehold flats?

With an election on the horizon, the government has the opportunity to positively reform property ownership for millions. With some additions and amendments, the Bill could be transformative.

Please do not hesitate to contact John Hodge Solicitors to discuss how The Leasehold and Freehold Reform Bill might affect you and your ownership of your property.