Leasehold and Freehold Reform 

The Leasehold and Freehold Reform Bill aims to reform home ownership in the housing market by reducing the number of leasehold properties in the future, and extending the minimum term of leasehold tenure, making it cheaper and easier for more leaseholders to extend their lease, buy their freehold and take over management of their building. Arguably, this Bill highlights the importance of the changes required to ensure a fairer future for homeowners. 

In the recent King’s Speech, the Government agenda for housing and leasehold  proposed the Leasehold and Freehold Reform Bill. The Bill will… 

 Empower Leaseholders by: 

• Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold – meaning leaseholders pay less to gain security over the future of their home.  
• Increasing the standard lease extension from 90 years to 990 years for both houses and flats, with ground rent reduced to £0. This ensures that leaseholders can enjoy secure, ground rent free ownership of their leasehold, without the worry of expensive future lease extensions. 
• Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes, therefore allowing leaseholders to enjoy their security of freehold ownership or a 990-year lease extension. 
• Increasing 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. This entitles leaseholders with up to 50% non-residential floorspace to buy their freehold or take over its management.  

Improve leaseholders’ consumer rights by: 

• Making 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 to a leaseholder by their freeholder. 
• Requiring transparency over leaseholders’ service charges so all leaseholders have 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. 
• Replacing buildings insurance commissions for managing agents, landlords and freeholders, with transparent administration fees so leaseholders aren’t charged exorbitant, opaque commissions on top of their premiums.  
• Extending access to “redress” schemes for leaseholders to challenge poor practice.  
• Scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.  
• Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders, namely by extending equivalent rights to transparency over their estate charges, access to support via redress schemes, and to challenge the charges they pay by taking a case to a Tribunal, just like existing leaseholders. 

• Building on legislation brought forward by the Building Safety Act 2022, ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work therefore protecting leaseholders by extending the measures in the Building Safety Act 2022. 

Reform the leasehold market by: 

• Banning the creation of new leasehold houses so every new house in England and Wales will be freehold from the outset (other than those in exceptional circumstances).  

 

There will also be consultation on capping existing ground rents, so all leaseholders are protected from making payments that require no service or benefit in return, have no requirement to be reasonable, and can cause issues when people want to sell their properties. Subject to that consultation, a cap will possibly be introduced through this Bill. 

Coupled with the potential changes in Shared Ownership that are proposed in the Renters Reform Bill, there could be a lot of changes for RSLs to consider in the sale of and management of their affordable home ownership stock in the future. 

If you would like any more information on leasehold reform, please contact Abigail Eves in the Social Housing team at abigaileves@msbsolicitors.co.uk.  

We’re here to help, so please pick up the phone or drop us an email and one of our dedicated team will help with your enquiry.