New legislation to make it easier and cheaper for leaseholders to purchase their freehold, extend their lease and take over management of their building was announced in the King’s Speech.
The Leasehold and Freehold Reform Bill proposes to transform the leasehold market and improve leaseholder’s consumer rights. If the Bill passes through the legislative process, it will deliver the government’s commitments on leasehold reform – tackling inequality within the housing market and improving home ownership in England & Wales.
The changes will give leaseholders more security, making their ownership similar to that of someone who owns a freehold.
Proposed reforms in the Leasehold and Freehold Reform Bill include
- Increasing the standard term of leasehold extensions from 99 years to 990 years for both houses and flats, with ground rent reduced to £0.
- Removal of the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from the changes;
- Setting a maximum time and fee for the provision of information required to sell a leasehold property, such as building insurance or financial records;
- Creating transparency over leaseholders’ service charges – costs should be in a ‘standardised comparable format’;
- Replacing buildings insurance commissions for managing agents, landlords and freeholders ‘with transparent administration fees’;
- Removing the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice; and
- Enabling leaseholders in buildings with up to 50% non-residential floorspace to buy their freehold or take over its management (an increase from 25%).
The Bill also proposes to ban the creation of new leasehold houses so that, ‘other than in exceptional circumstances’, every new house in England and Wales will be freehold from the outset – this will not extend to new build flats. Existing ground rents will be capped with the aim of making it easier to secure mortgages and sell properties.
