A new Bill that will reform the housing market by making it easier and cheaper for leaseholders to purchase their freehold and fight excessive service charges has been promised in the King’s Speech.
The Leasehold and Freehold Bill was introduced by King Charles on 7 November 2023 to “make the long-term and necessary changes to improve home ownership for millions of leaseholders”.
The Bill hopes to empower leaseholders, improve leaseholders’ consumer rights, and reform the leasehold market by simplifying the enfranchisement process for leaseholders to extend a lease, buy their freehold, and take over the management of their building.
The proposed legislation also hopes to reform the leasehold market by banning the creation of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.
The King’s speech briefing note sets out the key elements for reform. These include:
- Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold.
- Increasing the standard lease extension term from 90 to 990 years for both houses and flats, with ground rent reduced to £0.
- Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes.
- Increasing the 25 per cent ‘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.
- 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.
- Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees.
- 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.
- Building on the legislation brought forward by the Building Safety Act 2022, ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work.
The Bill is the latest in a series of government promises to reform the leasehold system in England and Wales, with changes to tackle unfair practices in the leasehold market first discussed in 2017.
Several reforms to the leasehold system have been introduced in recent years. These include the Leasehold Reform (Ground Rent) Act 2022, which came into force on 30 June 2022 and abolished ground rents for leases created after 30 June 2022, and the Building Safety Act 2022 (as amended by the Levelling-Up and Regeneration Act 2023), which created protections for certain leaseholders from excessive service charges in relation to fire safety work.
The government hopes to introduce the Leasehold and Freehold Bill this parliament, which means the new legislation could come into force by the end of 2024.
However, many industry insiders believe that the reforms should go further.
Jeremy Leaf, a London estate agent and a former RICS residential chairman said: “While we welcome a ban on new leasehold houses, it is disappointing that flats are not included in the legislation, as we wanted to see new and existing flats and houses included.
“Indeed, flat owners and those considering buying flats are looking for change as much as those purchasing houses, particularly given that flat owners often also have cladding issues to contend with.”
Mortgage Advice Bureau national new homes account director Mobeen Akram said: “Sky-high service charge payments only benefit those with the leaseholder title, and the proposed reforms to this dated approach would be regarded as a step in the right direction by future homeowners and mortgage professionals alike.
“However, for those holding leaseholds on new build flats, the struggle continues.”
National Leasehold Campaign (NLC) founder and spokeswoman Katie Kendrick said: “There are over 5 million leaseholders in England and Wales, many of whom live in flats and apartments.
“Whilst the announcements are a step forward, they don’t go far enough, and leaseholders continue to be taken for a ride by rapacious freeholders.
“There is nothing here to tackle the horrors of high service charges, increasing by way above inflation and freeholders taking commissions from suppliers on routine and major works.
We would have liked the King’s speech to have included a ban on leasehold in totality, not just for houses, and a drive for commonhold to be the default tenure for communal living, as it is across the rest of the world. Headlines don’t change anything, it’s action we need to see.”
Until the Bill passes into law, any leaseholder looking to extend their lease through formal channels will have to follow the procedure set out under the Landlord and Tenant Act 1987 (the Right of First Refusal) or section 13 of the Leasehold Reform, Housing and Urban Development Act 1993.
Lease Extension Solicitors Alton and Hampshire
At Bookers & Bolton Solicitors, we can advise you on the best way to proceed if you are looking to undertake a lease extension through the formal route.
Leaseholders can also extend a lease informally. This is where the leaseholder contacts their landlord, usually the freeholder, to try and negotiate a lease extension.
If you are considering extending your lease through the informal route, you will need an experienced property solicitor to help you with the legal process and handle any negotiations with the freeholder if necessary.
Our specialist conveyancing team at Bookers & Bolton has the knowledge and experience to guide you through the entire process, offering efficient and cost-effective legal solutions on your leasehold property matter.