Leasehold Reform - what do the government hope to achieve this year?
The Leasehold Reform (Ground Rent) Act 2022 limited the ground rent chargeable in most residential leases granted after 30 June 2022 (1 April 2023 for retirement homes) to a peppercorn per annum (effectively zero), but there may be further changes on the horizon regarding leasehold property.
At the end of November 2023, the King’s Speech included the proposed Leasehold and Freehold Reform Bill, which aims to address the lack of fairness and transparency that leaseholders face and give them increased rights.
Summary of proposals;
Simplify the process for leaseholders to extend their leasehold/buy the freehold;
Remove the requirement for a leaseholder to have owned the property for 2 years before acquiring rights to extend their leasehold/buy the freehold;
Simplify the valuation method so that, in general, the premium payable will be cheaper;
Increase the standard lease extension term to 990 years and ensure that where a premium is paid the ground rent is a peppercorn;
Make it easier for leaseholders in buildings to buy the freehold or exercise the right to manage the building, by allowing leaseholders in a building with up to 50% of non-residential use to acquire the freehold/exercise the right to manage (currently there must be a 75% residential element before rights can be exercised); and
Push landlords to be more transparent about service charges and provide regular key information about the charges in a standard form, which will allow leaseholders to review the reasonableness of the charges, compare the charges and better challenge any unreasonable costs.
One of the keys promises, of banning leasehold houses, has not actually made it into the Bill.
Although the Bill is still a long way from becoming law there is much for freeholders, investors, landlords and managing agents to consider and plan for.
Lastly, it was anticipated that the Renters (Reform) Bill would be on the statute books by now, but it is still being progressed through Parliament. Various amendments have been made to the draft and the “headline” game changer, the abolition of s.21 no fault eviction, will be delayed until there is further court reform – which could take years.
Posted on 01/11/2024 by Ortolan
