Is Leasehold Going To Be Abolished?

Nikka Sulton

Is Leasehold Going To Be Abolished?

The Leasehold and Freehold Reform Bill, introduced to Parliament on 27 November 2023, represents a significant step towards providing leaseholders with a fairer deal and greater autonomy over their properties. Its primary objectives include streamlining the process for lease extensions and freehold acquisitions, thereby reducing costs and complexities often associated with these transactions. By empowering leaseholders with enhanced rights and protections, the bill aims to address longstanding grievances within the leasehold system and promote a more equitable relationship between leaseholders and freeholders.

Despite initial expectations of leasehold abolition, as suggested by Michael Gove, the bill stops short of such radical measures. Instead, it focuses on specific reforms, such as restricting the practice of leasehold for newly constructed houses. While this may not fully satisfy the demands of leasehold critics, it signifies a substantial overhaul in leasehold regulations, marking the most significant reform in decades. The bill’s provisions are poised to reshape the landscape of property ownership, offering leaseholders greater control and flexibility in managing their homes while fostering a more transparent and equitable property market.

The key proposals are as follows:

Introducing a new standard valuation method is a significant step forward, as it not only simplifies the process but also reduces costs for leaseholders looking to extend their leases or buy the freehold. By standardizing pricing and removing the burden of paying the freeholder’s costs, this initiative aims to make property ownership more accessible and affordable.
Moreover, the extension of lease terms to 990 years for both houses and flats represents a substantial improvement in leaseholder rights. This extended tenure offers greater security and stability to leaseholders, eliminating the need for frequent and costly lease extensions. With longer lease terms, leaseholders can enjoy uninterrupted ownership without the hassle and expense of renewing leases periodically.
Enhanced transparency in service charge billing is another key aspect of the reform. By requiring freeholders to issue bills in a standardized format, leaseholders gain greater insight into their service charges, enabling them to scrutinize and challenge them more effectively. This transparency fosters accountability and ensures that leaseholders are not subjected to unjustified or inflated charges, promoting fair and equitable property management practices.
Additionally, the streamlined process for building management transfer empowers leaseholders to take control of their property management, reducing dependency on external agents and lowering associated costs. By allowing leaseholders to appoint their own managing agents, this initiative promotes efficiency and responsiveness in property management, leading to improved service delivery and cost savings for leaseholders.
Abolishing the obligation to pay the freeholder’s costs for exercising enfranchisement rights further enhances affordability and accessibility for leaseholders. This removes a significant financial barrier and makes it easier for leaseholders to assert their rights and take ownership of their properties. Additionally, mandating freeholders to join a redress scheme strengthens accountability and provides leaseholders with recourse to challenge poor management practices, ensuring their rights are protected and upheld.
These reforms represent a significant milestone in the evolution of leasehold rights, marking a departure from outdated and unfair practices towards a more transparent, equitable, and tenant-friendly system. By addressing key issues such as cost, transparency, and accountability, these reforms aim to create a fairer and more balanced property ownership landscape for leaseholders across the country.
Facilitating the process of buying or selling leasehold properties involves implementing a maximum timeframe and fee for obtaining home buying and selling information, aiming to expedite transactions and reduce administrative burdens.
Empowering homeowners in private and mixed-tenure estates with comprehensive redress rights enhances transparency regarding charges and enables them to challenge unjustified fees more effectively.
Expanding rights for occupants of mixed-use blocks ensures equitable treatment by increasing the threshold for enfranchisement eligibility to 50% of commercial space, enabling more leaseholders to exercise management or freehold claims collectively.
Prohibiting the sale of new leasehold houses, except in exceptional cases, ensures that all newly built houses will be freehold by default, eliminating complexities and uncertainties associated with leasehold ownership.
Eliminating the two-year ownership requirement for leaseholders seeking lease extensions or freehold purchases streamlines the process, granting quicker access to ownership rights and enhancing property ownership flexibility.

The Bill represents a crucial step in the government’s housing agenda, fulfilling its promises on leasehold reform outlined in the manifesto.

Additionally, the government is exploring measures to limit ground rents for existing leases, shielding leaseholders from excessive charges for services not rendered.

However, there’s expected resistance from landlords, especially larger estates, pension funds, and charities, as ground rent caps threaten their income streams.

Landlords are also likely to contest the proposed standard valuation method, which could reduce their compensation, particularly regarding marriage value, impacting leases with less than 80 years remaining. Challenges based on human rights arguments may arise, potentially stalling or altering the Bill’s implementation.