The King’s Speech: The Leasehold and Freehold Reform Bill

Last week marked the King’s first opening of Parliament. In his speech he set out the proposed contents of the Leasehold and Freehold Reform Bill.

The Leasehold and Freehold Reform Bill is part of a series of legislative measures to reform the leasehold and commonhold sector. This began last year with the Leasehold Reform (Ground Rents) Act 2022. This act prohibited the payment of ground rent for new leases, which we covered in more detail here.

What are the proposed changes?

The Leasehold and Freehold Reform Bill is intended to make the following changes:

• Make it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold;
• Increase the standard length of lease extensions for both houses and flats from 90 years to 990 years, with ground rent reduced to £0;
• Remove the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes; and
• Allow buildings with up to 50 per cent non-residential floorspace to buy their freehold or take over its management (up from the current limit of 25%).

However, it is notable that although there is a commitment to make it cheaper to extend leases, there is no specific commitment to abolish marriage value when calculating the premium payable for lease extensions. Although recommended by the Law Commission in their 2020 report, and announced by the Secretary of State in 2021, there was intense lobbying to not include this as part of the current reforms to leasehold law. It would appear that this lobbying has been successful.

Other proposed changes to the leasehold sector include:

• Banning the creation of new leasehold houses except in exceptional circumstances;
• Setting a maximum time and fee for the provision by the freeholder of information required to make a sale (such as building insurance or financial records);
• Requiring transparency over leaseholders’ service charges via a standardised comparable format which can be more easily scrutinised and challenged if unreasonable;
• Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees;
• Extending access to “redress” schemes for leaseholders to challenge poor practice;
• Scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice;
• Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders; and
• Ensure freeholders and developers are unable to escape their liabilities to fund building remediation work required by the Building Safety Act 2022.

When will these proposed changes be implemented?

Despite the wide reaching proposals, there is a very real risk that this legislation will fail to pass through parliament before the end of this government’s term. With an election required by January 2025 at the latest, the above proposals may remain as proposals, and not translate into actual legislation.

How Pinney Talfourd can help

Pinney Talfourd are experts in commercial and residential property litigation and can advise you on changes to the law so you are given up to date advice.

Please do not hesitate to contact either Oliver-James Topping on 01708 463227 should you wish to discuss anything further.