Progression in Leasehold Reform Legislation

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Date:  27/02/2024
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The Leasehold and Freehold Reform Bill, a crucial part of the UK government’s leasehold reform package, recently completed its committee stage with several amendments agreed upon.

This legislation aims to deliver on the government’s manifesto pledge to tackle unfair leasehold practices. The Bill, which is scheduled for report stage on 27 February 2024, is based on recommendations by the Law Commission, focusing on enfranchisement and the right to manage.

The proposed reforms will provide greater flexibility for leaseholders to extend their leases, expand the right to manage including the option to purchase the freehold, and increase standard lease extensions to 990 years. However, the anticipated outright ban on the sale of new leasehold houses was not included in the Bill.

Sale of Leasehold Houses Not Banned

Despite much speculation, the government did not introduce a ban on the sale of leasehold houses during the committee stage.

Another important issue that has yet to be resolved is that of the rates used to calculate the cost for a leaseholder when buying or extending a lease or enfranchisement. Namely deferment rates. The reforms intend to set these rates to reduce the amount of negotiation and argument that takes place when the Premiums (purchase prices) are established for lease extensions and freehold values. These rates are intended to be fixed by the government and detailed in secondary legislation. The aim is to minimize disputes and expedite the lease extension process. How these rates are fixed will make all the difference, and considering the government’s pledge to make extensions and freeholds more affordable for leaseholders, it will will certainly wish to account for that aim within it’s calculations.

Building Safety Amendments Rejected

Unfortunately, proposed amendments to extend the Building Safety Act’s cost protections to non-qualifying leaseholders did not receive support. Thus, landlords with non-qualifying leases will bear the full cost of rectifying building safety defects.

Discussions also centered on the new rights and protections for freehold estate owners. Amendments agreed upon will extend these protections and require leasehold landlords and freehold estate managing agents to join a redress scheme. This will enhance access to redress for leaseholders, who currently have to resort to court proceedings for resolution.

Ground Rent Consultation

The timing of the government’s recent ground rent consultation was a point of debate. The government plans to cap ground rent in existing leases to a ‘peppercorn’, mirroring the system for new leases. However, the consultation just ended, and there’s no indication of when the government’s response will be published, potentially leading to significant changes in ground rent provisions as the Bill progresses. In the current form of the Bill such right to remove the ground applies only to leases that exceed 150 years or more.

The number of amendments the bill has received is substantial, and there has been some critique that some of the proposals have been rushed and as such have not received the due attention to detail or have not been put to sufficient scrutiny and consideration. Within our next article, we intend to break down the most notable of these amendments and what they could mean in practice.

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