The Leasehold and Freehold Reform Bill

A new Leasehold and Freehold Reform Bill is working its way through the UK Parliament.

The proposed legislation aims to address criticisms that the current system is unfair to homeowners by banning the sale of new leasehold houses and creating a standard 990-year lease length for most apartment owners.

It would also streamline the extension process to be simpler and cheaper while restricting ground rents on new leases to zero cost.

The Bill has cross-party political backing, with some stating it represents the most significant leasehold reforms in decades that could save homeowners money if implemented.

The practical impact, however, depends on the Bill successfully passing through the full legislative process. As the scope could change, and no timeline is defined for the measures to take effect if approved into law.

With that in mind, here’s your guide to everything that’s currently going on with the Leasehold and Freehold Reform Bill.

What is The Leasehold and Freehold Reform Bill?
The Leasehold and Freehold Reform Bill targets key areas for housing changes. And aims to alleviate financial and legal burdens for homeowners stuck with outdated housing contracts.

The end of leasehold houses
It prohibits the selling of new leasehold houses. Ending a practice where house buyers still did not own their homes after paying off mortgages. Instead, freeholds will now be offered for all new houses.

Changes to existing leasehold houses
For existing leasehold houses, the reforms make it easier for owners to voluntarily extend leases to 990 years. With zero ground rents, essentially turning them into freehold equivalents.

New rules for flats
On flats, the Bill gives leaseholders the power to extend leases more easily and challenge unfair contract terms or costs imposed by freeholders. It also facilitates buying a share of freehold in apartment blocks without needing majority consensus.

If passed into law, these steps will curb exploitative charges in an area where costs have frequently spiralled out of control. While it won’t eliminate all leasehold problems overnight, it lays the legislative foundations to restore more balance.

The Leasehold and Freehold Reform Bill at a glance
There’s a fair bit packed into the Leasehold and Reform Bill. So, let’s break down the most important points and what they entail.

The bill plans to:

  • Make it cheaper and easier to extend your lease or buy the freehold for existing leaseholders in houses and flats.
  • Increase the standard lease extension term from 90 years to 990 years for houses and flats, with ground rent reduced to £0.
  • Remove the two-year ownership requirement before leaseholders can benefit from reforms.
  • Ban new leasehold houses in England and Wales – but not leaseholds on new flats.Make buying or selling a leasehold property quicker and easier by capping time and fees for information provision.
  • Require transparency over leaseholders’ service charges.
  • Replace building insurance commissions with transparent admin fees.Extend access to redress schemes for leaseholders to challenge poor practice.
  • Scrap presumption for leaseholders to pay freeholders’ legal costs when challenging poor practice.Grant freehold homeowners on private and mixed tenure estates the same redress rights as leaseholders.
  • Ensure freeholders and developers can’t escape funding remediation work.
  • Allow leaseholders in buildings with up to 50% non-residential floorspace to buy their freehold or take over its management.

Is this leasehold reform new?
Concern about the leasehold system isn’t new news. There were commitments and pledges to overhaul it in the 1980s, but meaningful action failed to materialise.

A lack of action led to an increasing number of homeowners feeling trapped. Paying high fees for homes they would never technically call their own. But after decades of empty promises, the leasehold scandal came to a head in 2017 when the problems made front-page headlines.

Leasehold reform is a component of housing policy and is something our friends at Propertymark have campaigned on for several years now. Their research paper of 2018 ‘Leasehold: A Life Sentence’ highlighted a lot of leasehold issues.

Fast-forward to 2024, and mounting public pressure looks like it’s about to effect change. And we’re seeing a concerted effort to rectify problems with the Leasehold and Freehold Reform Bill.

When will the Leasehold and Freehold Reform Bill come into effect?
The Leasehold and Freehold Reform Bill was introduced in the House of Commons on November 27th, 2023, as part of the legislative agenda outlined in the King’s Speech.

While the Bill sets out proposals to overhaul leasehold rules, the scope and timing of these reforms face uncertainty as the legislation navigates Parliament. There is currently no defined timeline for when the bill might receive Royal Assent to become law.

Additionally, details are pending on when each specific reform would take effect if approved. As well as the possibility of initial measures being amended during parliamentary procedure.

The practical impact relies on sustained momentum to successfully translate announcements into legally binding changes. Which could meet roadblocks before enhancements materialise for existing homeowners.

Should I extend my lease now or wait?
For existing leaseholders considering extending their lease, the best move will likely be to proceed ahead of the reforms being finalised. Despite the legislative momentum, successfully turning the bill into law will not be quick.

Having extra years on your lease guarantees more protection if other aspects like ground rent reduction don’t come to fruition.

Selling your home?
If you’re looking to sell a property, freehold or leasehold, contact our experienced team today by clicking here

If you would like to learn more about lease extensions and what is involved at present, please contact Ian Perry

Content courtesy of Phil Spencer – Last Updated: January 24th, 2024

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