Leasehold and Freehold Reform Bill: Proposed Reforms to Benefit Homeowners in England and Wales
A new bill to reform the housing market was announced in the King’s Speech. Gabrielle Roberts, Senior Associate in Clarke Willmott’s Property Litigation team listened in to report on what was said and the potential implications that could arise from the proposed reforms.
The Leasehold and Freehold Reform Bill will apply to England and Wales and is intended to give homeowners a fairer deal and to make it cheaper and easier for more leaseholders to extend their lease, buy their freehold and take over management of their building.
The proposed reforms include:
- Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease, buy their freehold, and take over the management of their building.
- Increasing the standard lease extension term from 90 years to 990 years for flats and houses, with ground rent reduced to £0, to provide leaseholders with greater security of tenure, rent free.
- Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes which means more leaseholders will qualify to extend their lease or buy the freehold.
- Increasing the 25 per cent ‘non-residential’ limit which prevents leaseholders in mixed use buildings from buying their freehold or taking over management of their buildings, to allow leaseholders in buildings with up to 50 per cent non-residential floorspace to buy their freehold or take over its management.
- Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee for the provision of information to a leaseholder by their landlord.
- Requiring transparency over leaseholders’ service charges by introducing a standardised comparable format for service charge costs information to make it easier for leaseholders to scrutinise and challenge the costs if they are unreasonable.
- Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees to stop leaseholders being charged exorbitant, opaque commissions on top of their premiums.
- Requiring more freeholders to belong to a redress scheme so that leaseholders can 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 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.
- Extending measures in the Building Safety Act 2022 to protect leaseholders by ensuring that freeholders and developers are unable to escape their liabilities to fund building remediation work.
- 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.
- Subject to consultation, introducing a cap on existing ground rents to protect leaseholders from making payments that require no service or benefit in return or have no requirement to be reasonable and can cause issues when people want to sell their properties.
There is still a lot of detail to be worked out and no timeframe for these reforms. It remains to be seen when or indeed whether these reforms will come into being.
For more information on the Leasehold and Freehold Reform Bill, please contact us online.