Leasehold Reform update – the King’s Speech 2023

At the beginning of 2021 the Government announced its intention to set future ground rents to zero and reform the legislation on leasehold enfranchisement in response to the Law Commission’s report and recommendations with the aim of making it easier, quicker and cheaper for leaseholders to buy their freehold or extend their lease.

The Leasehold Reform (Ground Rent) Act 2022 was the first step, reducing ground rents to a notional peppercorn (nil) in most new leases in England and Wales from 30 June 2022 and restricting permitted rents on any voluntary renewal/extension.

The King’s Speech has confirmed the Government’s commitment to taking forward a Leasehold and Freehold Reform bill for England and Wales.  Whilst we await publication of the draft bill, key points highlighted, as part of the stated aim to make it cheaper and easier for leaseholders to purchase their freehold and tackling exploitation of homeowners through punitive service charges, included:

• Making it easier and cheaper for existing leaseholders in both houses and flats to extend their lease or buy their freehold.
• Lease extensions for both houses and flats will be 990 years in place of the current 90 years for flats with ground rent reduced to nil – this is not currently the case for lease extensions of houses.
• Removing the requirement for the leaseholder to have owned their flat or house for two years before making any claim.
• Increasing the non-residential limit to 50% on mixed use buildings to allow more residential leaseholders to acquire the freehold or take over management. At present if the non-residential element of a mixed-use building is over 25% these rights do not apply.
• Banning the creation of new leasehold houses so that all new houses in England and Wales will be freehold from the outset.
• Giving freehold homeowners on private or mixed tenure estates similar rights to leaseholders by transparency on estate charges, access to support via redress schemes and to challenge estate charges payable via the Tribunal service.
• Consultation on capping existing ground rents.
• Other steps to improve leaseholders’ consumer rights such as:
  • Setting a maximum time/fee for the landlord to provide information required for sale of a leasehold property.
  • Better transparency over service charges in a standardised comparable format.
  • Transparent administration fees in place of buildings insurance commissions for landlords/agents.
  • Extending access to redress schemes to challenge poor practice and ending any presumption for leaseholders to pay landlords’ legal costs when challenging poor practice.

Watch out for further updates once the bill is published.