MIH Team
31/10/24
Budget Special
020 3637 7968
info@mihproperty.co.uk020 3637 7968
The Leasehold Reform Bill was announced during the Kings speech on 7th November 2023 and published on the 23rd of the same month. The Second Reading followed swiftly just 3 weeks later – a clear indication that Michael Gove’s Levelling Up Committee is fast tracking this bill to try to ensure it is enacted or very close to enactment in advance of the next election. An outcome is predicted for mid 2024.
This bill is the second stage following on from the Leasehold Reform (Ground Rent) Act 2022, which effectively banned attaching ground rents to new leasehold properties by reducing them to a ‘peppercorn’.
“In legal parlance, a peppercorn is a metaphor for a very small cash payment or other nominal consideration, used to satisfy the requirements for the creation of a legal contract.
This significant piece of legislation aims to reform current leasehold law, the proposed new legislation, which is deemed to be in the freeholders’ favour currently, and make good on the Government’s commitment to make it ‘easier, faster, fairer and cheaper’ for leaseholders to extend their lease or purchase the freehold to their property.
‘easier, faster, fairer and cheaper’
For existing leasehold property owners the bill has been long anticipated. The introduction of much needed regulation to the leasehold system is long overdue. The Bill aims to regulate the fees charged by freeholders, and provide leasehold homeowners with greater control over their properties and associated costs.
Across the UK and Wales a sizeable percentage of homeowners own leasehold properties. Under the terms of a leasehold, you own the property for the length of your lease agreement with the freeholder, but not the land. At the end of your lease, ownership returns to the freeholder, unless the lease is extended.
“Government data suggests there are almost five million leasehold properties in England, which makes up 20 per cent of the current housing stock.”
Most flats and maisonettes are held under leasehold since more than one property exists on a single piece of land, owned and usually, (subject to the terms of the lease), maintained by the Freeholder. In addition, some houses are sold under leasehold and again the buyer owns the property, but not the land and must pay a ground rent, though this scenario is much less common.
The government is still committed to banning new leasehold houses in England and Wales and will be amending the Bill. However, the proposed ban on leaseholds is targeted at new build houses only and will not extend to new flats.
The proposed Bill is steadily making its way through the House of Commons having passed the First and Second Reading, the Committee Stage, and is now at the Report Stage before passing to the House of Lords.
The Bill does finally grasp the bull by the horns and should ensure that the majority (but not necessarily all) leaseholders are in a stronger position than previously. But don’t hold your breath just yet – even when the Leasehold and Freehold Reform Bill is passed, it will take time for the changes to be implemented because these will require regulations to be created too.
It’s good to see significant change on the horizon and we’ll be following the updates closely to ensure that we are up to speed and ready to support our both our freeholders and leaseholders in the light of these changes and in the day-to-day management of leasehold matters.