The Leasehold and Freehold Reform Bill advances

The Leasehold and Freehold Reform Bill continues to be in the limelight. In accordance with the commitments made in the King's Speech, it was presented to Parliament on November 27, 2023.

So, what stage of the parliamentary process is the Leasehold and Freehold Reform Bill at?

Following its second reading in the House of Commons on December 11, the Public Bill Committee invited submissions of evidence by February 1, 2024. The 140-page draft bill aims to improve the rights and safeguards for owners of long-leasehold homes. It combines various reforms about leasehold and freehold that the government has advocated for several years. The proposed changes include improvements to leaseholders' right to manage, enfranchisement, lease extensions, and freehold estate management and will be applicable to England and Wales.

The Leasehold and Freehold Reform Bill also aims to simplify and reduce the cost for current leaseholders of houses and flats when extending their lease or purchasing their freehold. The proposed reforms also aim to streamline and boost the marketability of these property types, making them easier to sell.

The bodies that have been involved in consultations on the Leasehold and Freehold Reform Bill are:

The Public Bill Committee has received input from the Leasehold Knowledge Partnership and the National Leasehold Campaign. Supplementary assessments from various property groups are anticipated later this week. The Labour Party, represented by Shadow Housing Minister Matthew Pennycook, has proposed amendments. One such amendment highlights establishing a residents' management company for new flats, facilitating leaseholders assuming control of block management.

According to Matthew Pennycock, Labour will seek to strengthen this unambitious piece of legislation to further advantage leaseholders. But it will fall to a Labour government to fundamentally and comprehensively overhaul the current system.

Ground rents and lessehold houses: ground rent is banned, will leasehold be banned for houses?

The opposition has questioned the absence of the initially promised ban on leasehold sales of houses in the initial legislation. However, there is hope that this aspect will be introduced during the committee stage.

Total ground rent reform: What proposals are being considered for ground rent reform in the UK?

A related consultation on reforming ground rents is set to conclude shortly. All the stakeholders, including agents, were encouraged to provide their feedback. The government is seeking opinions on several proposals. These include setting ground rents at a nominal amount, establishing a maximum financial limit for ground rents, capping ground rents as a percentage of property value, restricting ground rent in existing leases to the original amount granted, and freezing ground rent at current levels. This initiative follows a survey by the Association of Leasehold Enfranchisement Practitioners. The survey revealed that 80 percent of its members believe residential ground rents can adversely affect or have an undesirable impact on the sale of leasehold properties.

Respondents highlighted that property sales are often hampered because of mortgage providers' aversion to ground rent terms. Around 43 per cent of respondents pointed out that the comprehensive terms associated with ground rent payments are not transparently communicated during the property purchase process. Some leaseholders seem unaware that their ground rent may rise to a percentage of the market value of the property which can mean a ground rent of terms of thousands of pounds every year.

The next step for the Leasehold and Freehold Reform Bill is the Committee stage, scheduled for next week. During this stage, the Public Bill Committee will meticulously scrutinise the bill line-by-line and present its findings to the House of Commons by Thursday, February 1, 2024. After the Committee stage, amendments will be deliberated before the bill progresses to the Commons for a Third Reading. The outcome of the committee stage, with additional amendments and detailed comments, is eagerly anticipated.

What’s Next for the Leasehold and Freehold Reform Bill?

As the Leasehold and Freehold Reform Bill advances through Parliament, its impact on leaseholders and freeholders is expected to reshape the housing landscape in England and Wales. While the committee stage is crucial for refining the bill with amendments, the focus remains on reducing costs, improving marketability, and strengthening leaseholder rights. The ongoing consultations, political debates, and proposed amendments, including the potential ban on leasehold houses, will continue to influence the final form of the legislation. Leaseholders and property professionals alike are keenly awaiting the next steps in this transformative process.