Leasehold Reform Update – January 2024

The Leasehold and Freehold Reform Bill 2023 – 2024 (the “Bill”), which was introduced to the House of Commons in November 2023, represents a significant step towards the UK government’s ambition to bring about fundamental reform of leasehold law. Some key provisions and changes proposed by the Bill are set out below:

Extension of Lease and Purchase of Freehold

The aim is to make it more affordable and easier for leaseholders in both houses and flats to extend their lease and buy the freehold. The Bill proposes increasing the standard lease extension term to 990 years with ground rent reducing to a peppercorn (a zero financial value) upon payment of a premium.

Qualifying Criteria

Changes to qualifying criteria are proposed so that more leaseholders have the right to extend their lease, buy their freehold, or take over management of their building.

Service Charge Transparency

The aim is to improve transparency in service charges and ensure that leaseholders receive essential information regularly. A new right for leaseholders is proposed where they can request information about service charges and management of their building.

Administration Charges and Buildings Insurance

The aim is to enhance transparency regarding administration charges and buildings insurance commissions.

Legal Costs

Protection will be provided for leaseholders from unjustified legal costs, with them having the right to claim their legal costs from their freeholder.

Freehold Homeowners’ Rights

Freehold homeowners who pay charges for maintaining communal areas or facilities on a private or mixed-tenure residential estate have been granted the right to challenge the reasonableness of charges as well as services quality received.

Estate Charges Transparency

Transparency will be improved when it comes to estate charges for freehold homeowners ensuring they get key information regularly.

Rentcharge Regulation

If unpaid rent charge remains unpaid for short period then owners won’t have permission take possession nor grant a lease on a freehold property.

Related Proposals

The Bill is part of a two stage legislative package to reform leasehold law, the first stage being the Leasehold Reform (Ground Rent) Act 2022 which abolished ground rents for most new residential leasehold properties.

Other proposals made by the government include reviving common hold tenure, regulating all property managing agents and establishing a redress reform working group to improve housing complaints resolution service.

Wales

Whilst housing is a devolved policy area in Wales, the law of property itself is reserved. In addition to this, The Leasehold Reform (Ground Rent) Act 2022 has effect in Wales and the Welsh Government has said it intends to lay a Legislative Consent Memorandum for the Leasehold and Freehold Reform Bill.