The King’s Speech – Leasehold Reform on the Horizon?
The King’s Speech on 7 November 2023 set out the various pieces of legislation that the Government intend to enact in the upcoming parliamentary session. Of interest to many in the housing world will have been mention of a Leasehold and Freehold Reform Bill which would seek to address the longstanding issue of fairness in the housing market. But what does it actually mean and how does this impact managing agents and landlords?
What is it?
The Bill proposes the following:-
- Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold including removing the requirement for a new leaseholder to have owned their house or flat for two years before they can seek a leasehold extension or purchase their freehold.
- Increasing the standard lease extension term from 90 years to 990 years for both houses and flats, with ground rent reduced to £0.
- Increasing the 25 per cent ‘non-residential’ limit preventing leaseholders in buildings with a mixture of homes and other uses such as shops and offices, from buying their freehold or taking over management of their buildings.
- Requiring transparency over leaseholders’ service charges, and that these can be challenged.
- Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees
- Extending “redress” schemes to more freeholders so that leaseholders can challenge poor practice.
- Removing the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor service.
- Building on the legislation brought forward by the Building Safety Act 2022, ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work
- Banning the creation of new leasehold houses
There was also the announcement of a consultation on caps for existing ground rent provisions.
What is the possible impact?
Unclear. Especially when it comes to existing leaseholds and the terms of those leases, at least until they are due for renewal. It is also unknown as to whether many of the proposed changes would impact the provision of service charges for leasehold properties. It does appear that there will some proposals surrounding the transparency of service charges and the associated costs and administration charges, together with the recoverability of those from the leaseholder, however what form these may take is not yet known.
Once we have a published Bill it will hopefully provide some transparency on how the Government intend to implement these proposed changes as well as filling in some of the potential gaps which may cause concern to some of our housing clients.
This being said, with a General Election looming in the next 12 months and a recently sacked Housing Minister, will there be enough time to implement these proposed changes? We at Greenhalgh Kerr will continue to monitor the developing situation, alongside the Renter’s Reform Bill, and keep you as updated as possible!
Briefing Notes for Kings Speech found here: https://assets.publishing.service.gov.uk/media/654a21952f045e001214dcd7/The_King_s_Speech_background_briefing_notes.pdf