The Passing of the Leasehold and Freehold Reform Bill – A Muted Win for Leaseholders

The Leasehold and Freehold Reform Bill has just passed through the House of Lords and House of Commons and Royal Assent is expected.
 
Linz Darlington, Managing Director of leasehold extensions specialists, Homehold says: "This limited bill is a muted win for leaseholders. While the legislation is not without merit, leaseholders must see it as a step in a journey rather than the destination itself.

The bill does not contain many of the important provisions that were promised by the Government. The commitment to remove ground rent for existing leaseholders, or even cap it at £250, has not been included. 

Another notable omission from the bill is the prevention of forfeiture, a draconian measure that allows a freeholder to repossess a flat for a debt of just £350.

Frustratingly, most of the changes which have been included will not come into effect immediately or even within a specified timeline. These included-but-delayed changes include banning leasehold houses, and also abolishing marriage value which could make it cheaper for leaseholders with fewer than 80 years left to extend their leases.

Instead, we will have to wait for additional legislation to fill in the gaps - and the bill's impact assessment suggests this won't be in place until 2026. This secondary legislation – which will set the key rates used to calculate lease extension and freehold purchase prices – will also have the potential to make lease extensions more expensive for those with leases above 80 years and lower ground rents.

It was also clear from comments made in both houses that it is anticipated that the freehold sector will respond to this bill through litigation. They will argue in court that provisions that make it cheaper for leaseholders with short leases to extend them infringe upon their human rights. We may have to wait for the outcome of these legal challenges before leaseholders can benefit from the reform.

The lack of scrutiny that such a complex bill has had was consistently mentioned in the House of Lords. Invariably, as the final bill is scrutinised by the lawyers and valuers who will practice this area of law, there will be errors and omissions identified. These will need to be resolved either through further legislation or litigation.

As promising as this step is, it will be the responsibility of the next Government, and the timeline they set, to get leasehold reform to the point it will actually benefit leaseholders.”