Reform of Leasehold at Last?

By Lucy Riley

Legal Director

On 27th November 2023 the Leasehold and Freehold Reform Bill was finally presented to Parliament but what does it propose for lease extensions and other enfranchisement claims?

  • Increasing the length of the new lease to 990 years
  • Reducing the ground rent payable for lease extensions for houses to nil (the current law for flats already includes this)
  • Removing the 2 year ownership requirement for lease extensions
  • Allowing leaseholders in buildings which contain up to 50% commercial space to collectively buy their freehold or obtain the right to manage
  • Requiring the landlord to take leases of non-participating flats to make it cheaper for leaseholders to buy the freehold of buildings where not all leaseholders wish to take part in the purchase of the freehold
  • Removing the requirement for leaseholders to pay marriage value where their leases have less than 80 years left to run
  • Setting the rates referred to in the calculation of the price payable for freehold purchases and lease extensions and removing ground rents from the calculation if they exceed 0.1% of the freehold value
  • Scrapping the requirement that leaseholders pay their landlord’s costs in connection with statutory lease extension, freehold purchase or right to manage claims
  • Introducing a stand-alone right to “buy-out” the ground rent payable under a lease where the term does not need to be extended.

What else is planned?

  1. Setting a maximum time limit and fee for the provision of the “Sales Pack” produced by the landlord and/or management company which is required when selling a leasehold property
  2. Requiring the use of a new form of service charge demand and service charge accounts
  3. Implying a term into every relevant lease that service charge accounts must be produced to the leaseholders within six months of the end of the service charge year
  4. Introducing the right for leaseholders to apply for a court order to force compliance with 2 and 3 above and to be awarded compensation of up to £5,000 for non-compliance
  5. Imposing a ban on landlords recovering litigation costs from leaseholders
  6. Replacing buildings insurance commissions paid to landlords and managing agents with transparent admin charges
  7. Requiring more landlords to join redress schemes so that more leaseholders can access dispute resolution processes
  8. Scrapping the presumption that leaseholders should pay their landlord’s legal costs when challenging poor practice
  9. Extending the service charge challenge regime to owners of houses on private residential estates
  10. Increasing the jurisdiction of the First Tier Tribunal.

The Bill is currently progressing through the Committee Stage of its parliamentary process. It is of course impossible to say how long it will take to progress through the remaining stages and if there will be a challenge under the Human Rights Act 1998.

For leaseholders who are considering making applications under the new regime, it could be a long wait.

For more information and advice on how the Bill could affect you please contact Lucy Riley in our Commercial Property Team on 0345 646 0406 or fill in our online enquiry form for more information.