The Bill has made it through the House of Commons and has had two readings in the lords – the committee stage in the Lords is due for 22nd, 24th and 29th April and ends on 1st May.

The Lords will then produce a report and they have a third debate on the Bill (no dates are currently set for these stages) and then the Bill goes back to the Commons for consideration of amendments and Royal Assent.

But that will not be the end of the process – after than there will most likely be parliamentary procedures required to finalise the Bill and the Secretary of State will have to set percentages and other valuation variables to be used in the lease extension and freehold purchase calculation.

There is no guarantee that this can take place before the next general election. The outcome of this Bill is still not guaranteed.

My advice remains the same – if you have a low ground rent and a lease above 80 years unexpired and you want to extend your lease you should still consider proceeding now.

If you have a lease under 80 years or a high ground rent – and you are abe to wait, it might be worth waiting to see what happens with the Bill.

If you are still not sure what to do and you need advice – feel free to contact us

Email:    amarsden@marsdensurveyors.co.uk

Web:      www.marsdensurveyors.co.uk

For more information about the progress of the Bill visit https://bills.parliament.uk/bills/3523

The Bill has progressed to the House of Lords

It will still need a second reading, the committe stage and a third reading before it can move towards Royal Assent.

The second reading in the Lords is taking place on 27th March 2024

To see how the Bill is progressing – follow this link https://bills.parliament.uk/bills/3523

 

The Bill has completed the committee stage and on 27th February 2024 it had its third reading in Parliament with proposed amendments.

Here is a link to the latest update from Parliament – https://hansard.parliament.uk/commons/2024-02-27/debates/6FE58B52-9F01-4FC5-8E26-C97C5A7B383A/LeaseholdAndFreeholdReformBill

 

 

The Government appears determined to get this Bill onto the Statue books.

The First Reading of the Bill in parliament was on 27th November 2023

The Second Reading of the Bill was on 11th December 2023

On 11th December there were also the following:

Programme Motion

Money Resolution

and a Ways and Means Resolution

The Government has already announced that the committee stage is likely to commence on 15th January 2024 and they are asking ‘interested parties’ to submit their comments on the proposed reforms via this link https://www.parliament.uk/business/news/2023/december-2023/leasehold-and-freehold-reform-bill-call-for-evidence/

A full copy of the proposed Bill can be found here https://publications.parliament.uk/pa/bills/cbill/58-04/0013/230013.pdf

Proposed amendments can be found here https://publications.parliament.uk/pa/bills/cbill/58-04/0013/amend/leasehold_rm_pbc_1220.pdf

This link outlines the stages of the proposed Bill https://bills.parliament.uk/bills/3523/stages

It looks very liekly this will become law

 

 

Anyone can take part in the Government’s consultation on Ground Rents – simply follow this link: https://www.gov.uk/government/consultations/modern-leasehold-restricting-ground-rent-for-existing-leases

All responses must be made by the 21st December 2023

Rishi Sunak has asked the housing minister Rachel Maclean – (quoted in an earlier update) to step down.

In her place Lee Rowley has been appointed Minster of State (Minister for Housing) in the Department for Levelling Up, Housing and Communities

Whether this will have any impact on the proposed Leasehold and Freehold Bill remains to be seen – more updates to follow

Yesterday (9^th November) the Government released its consultation on Ground Rents. This is a new proposal not suggested previously and the Government want to consult on this before putting it in the proposed Bill.

https://www.gov.uk/government/consultations/modern-leasehold-restricting-ground-rent-for-existing-leases

They are seeking people’s views from the industry and leaseholders on how the current rent in flats should be capped or extinguished. Their aim is make living in a leasehold property easier, cheaper and fair.

They are asking for people’s opinions on five different possible solutions.

1. Reduce all current ground rents to a peppercorn – £0
2. Cap all current ground rents to a maximum figure – a maximum ground rent of £250pa is suggested.
3. Cap ground rents to a percentage of the value of the property – a figure of 0.01% of the total value has been suggested.
4. Fix all ground rents to their original amount – the ground rent that was payable at the beginning of the lease – regardless of the ground rent now payable.
5. Fix all ground rents at the amount currently paid. So that there will be no more increases ground rent.

The consultation closes on 21^st December 2023.

This proposal is controversial. It is rare for a Government to become involved in altering existing contracts. A lease is a contract between a leaseholder and a freeholder. Some people have suggested that this proposal would be ‘confiscation’ by the Government. As such I believe that this controversial proposal will be challenged and it is possible it may not find its way into the proposed legislation. However the government does appear to be determined to get all their proposals through the legislative process before the end of 2024.

 

After the King’s Speech on Tuesday the Prime Minister issued a briefing giving more details on what was outlined in the speech – this is the link to the full document – it runs to 78 pages

https://assets.publishing.service.gov.uk/media/654a21952f045e001214dcd7/The_King_s_Speech_background_briefing_notes.pdf

In relation to the proposed leasehold reform pages 45 – 47 are as follows: I have highlighted the most relevant points

Leasehold and Freehold Bill
“My Ministers will bring forward a bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold and tackling the exploitation of millions of homeowners through punitive service charges.”

• The Leasehold and Freehold Reform Bill delivers the Government’s manifesto
  commitments on leasehold reform. This decisive action will address one of the
  longest-term challenges that the country faces: fairness in the housing market.
• The Bill will make the long-term and necessary changes to improve home
  ownership for millions of leaseholders in England and Wales, by making it cheaper
  and easier for more leaseholders to extend their lease, buy their freehold, and take
  over management of their building.
• These reforms build on the success of the Leasehold Reform (Ground Rents) Act
  2022, which put an end to ground rents for new, qualifying long residential
  leasehold properties in England and Wales as part of the most significant changes
  to property law in a generation.

What does the Bill do?
● The Leasehold and Freehold Reform Bill will put the country on the right path for
the future by giving homeowners a fairer deal in the following ways:

• Empowering leaseholders:

o Making it cheaper and easier for existing leaseholders in houses and
flats to extend their lease or buy their freehold – so that leaseholders pay
less to gain security over the future of their home.

o Increasing the standard lease extension term from 90 years to 990 years
for both houses and flats, with ground rent reduced to £0. This will ensure
that leaseholders can enjoy secure, ground rent free ownership of their
properties for years to come, without the hassle and expense of future lease
extensions.

o Removing the requirement for a new leaseholder to have owned their
house or flat for two years before they can benefit from these changes –
so that more leaseholders can exercise their right to the security of freehold
ownership or a 990-year lease extension as soon as possible.

o Increasing the 25 per cent ‘non-residential’ limit preventing leaseholders
in buildings with a mixture of homes and other uses such as shops and
offices, from buying their freehold or taking over management of their
buildings – to allow leaseholders in buildings with up to 50 per cent non-
residential floorspace to buy their freehold or take over its management.

• Improving leaseholders’ consumer rights:
• Making buying or selling a leasehold property quicker and easier by
  setting a maximum time and fee for the provision of information required to
  make a sale (such as building insurance or financial records) to a leaseholder
  by their freeholder (known as ‘landlords’).

o Requiring transparency over leaseholders’ service charges – so all
leaseholders receive better transparency over the costs they are being
charged by their freeholder or managing agent in a standardised comparable
format and can scrutinise and better challenge them if they are unreasonable.

o Replacing buildings insurance commissions for managing agents,
landlords and freeholders with transparent administration fees – to stop
leaseholders being charged exorbitant, opaque commissions on top of their
premiums.

o Extending access to “redress” schemes for leaseholders to challenge
poor practice. We will require more freeholders to belong to a redress
scheme so leaseholders can challenge them if needed.

o Scrapping the presumption for leaseholders to pay their freeholders’
legal costs when challenging poor practice.

o Granting freehold homeowners on private and mixed tenure estates the
same rights of redress as leaseholders – by extending equivalent rights to
transparency over their estate charges, access to support via redress
schemes, and to challenge the charges they pay by taking a case to a
Tribunal, just like existing leaseholders.

o Building on the legislation brought forward by the Building Safety Act
2022, ensuring freeholders and developers are unable to escape their
liabilities to fund building remediation work – protecting leaseholders by
extending the measures in the Building Safety Act 2022 to ensure it operates
as intended.

• Reforming the leasehold market:

o Banning 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.

• We will also consult on capping existing ground rents, to ensure that all
  leaseholders are protected from making payments that require no service or benefit
  in return, have no requirement to be reasonable, and can cause issues when
  people want to sell their properties. Subject to that consultation, we will look to
  introduce a cap through this Bill.

Territorial extent and application

• The Bill will extend and apply to England and Wales.
  Key facts
• The Building Safety Act 2022 delivered far-reaching protections for leaseholders
  against remediation costs and an ambitious enforcement regime to hold
  freeholders and developers to account.
• There are 752,000 households with children and 1.48 million over-65s who are
  leasehold homeowners.
• Leasehold reform will support the housing market. 49 per cent of leaseholders are
  first time buyers, and 28 per cent of leaseholders are under 35. Land Registry data
  tells us that 22 per cent of residential property transactions in 2019 were leasehold
  – around 238,000 transactions in total. Almost all flats are sold on a leasehold basis
  compared to 6 per cent of houses.
• The current leasehold system leaves many homeowners trapped in their properties
  or facing extortionate costs to buy their freeholds, for example:

o Case Study 1: Sian paid £225,000 in 2020 for her new build flat in Southend.
Her lease had a ground rent indexation start date of March 2018 (when the
development started) with 5-year reviews based on RPI, and so is now due
for review. As a result, Sian has seen her ground rent rise from £350 to over
£450 per year and she is braced for another RPI review in five years’ time.

o Case Study 2: Zack bought a flat in North Yorkshire in 2008 with a ground rent
of £300 and a 10-year doubling clause, meaning he now pays £600. Zack
wants to sell the flat and is considering a lease extension to extinguish the
ground rent as he does not think lenders will lend against a lease with the
current ground rent terms. He has been quoted £25,000 to extend the lease
and cannot afford to pay this sum.

• Our reforms will tackle these issues head on:

o We are making it significantly cheaper for leaseholders to extend their leases.
For example, a young first-time buyer in a £250,000 leasehold flat in
Birmingham with 76 years left on the lease would currently have to pay around
£16,000 to extend the lease plus around £10,000 to cover their costs and the
freeholder’s costs. Under our reforms, they will now only pay around £9,000
plus their own legal costs for a 990-year extension – a saving of over £10,000.

o The ground rents cap we are consulting on could save leaseholders up to an
average of £250 in year one and £6,000 over the remaining term of their lease
– that would be £250 back in people’s pockets each year. This will also make
it easier for people to sell their properties and get mortgages.

I have consdered the examples given and an analysis of these examples shows that they are not completely accurate and can only be considered an example of the type of saving that might be possible wiith their prposals – the examples appear to have been taken from the previous consultation on Leasehold reform and the example set in Birmingham has been calculated using variables suitable for leasehold houses and not flats. It appears these examples have been used to broadly illustrate the Government’s aims rather than to be accurate examples.  

So far all we have is a commitment to alter leasehold law and to make it cheaper and easier to extend your lease or purchase your freehold.

The Government have said previously that they are committed to abolishing marriage value but until the details of this commitment are confirmed we cannot say if this will be the case. However to make the process cheaper, abolishing marriage value would be the most likely, if controversial way to do this.

They have not given any additional detail and we await further announcements. This is simply a proposed Bill and it will take some time for it to progress through Parliament and become law.

It would appear that although their commitment to the Bill has been made clear we are unable to confirm when it will become law and what the final Legislation will contain.

However based on their previous announcements the Bill is likely to include the following with regard to lease extensions:

1. New leases to be 990 years plus the current lease.
2. Abolition of marriage value (on any leases below 80 years – above 80 years there is already no marriage value).
3. A cap on ground rents that can be used in the premium calculation no matter how high they are or will be over the term of the lease.
4. A possible reduction of all current ground rents to zero. This is yet to be confirmed.
5. Freeholder’s to pay all their own costs.
6. A commitment to make the valuation process more regimented and ‘cheaper’ for leaseholders.
7. The possible abolition of the two year ownership rule – currently required in order to qualify to extend a lease.

With regards to freehold purchases the proposals are similar however there is a proposal for dealing with any development land or roof space with a potentially high value, which is owned by the freeholder. The proposal is that this land or roof space can be leased back to the freeholder to avoid any excessive costs when acquiring the freehold.

There is also a commitment to ban the sale of leasehold houses unless in exceptional circumstances.

My current advice is as follows:

• If you have a lease above 80 years unexpired then I recommend that you seriously consider moving forward with your proposed lease extension or freehold purchase. However if you have a very high rising ground rent seek professional advice before proceeding.
• If you have to extend your lease to obtain finance or as part of a sale or purchase – you may have no other choice but to continue with your lease extension.
• If you want to extend your lease or purchase your freehold to suit your own personal circumstances then you may have to proceed regardless of any proposed new legislation.
• If your lease is below 80 years unexpired and you have time, then I recommend that you wait to see how the proposed Bill progresses. This is a short term of Parliament and there are many proposed Bills to process, there is still no guarantee that the proposed new legislation will become law.

If you need further advice about any aspect of residential leasehold property, please feel free to contact me

 

 

This Extract is from page 25 for the notes provided by the Government on today’s King’s Speech

4.5 Leasehold and commonhold reform

On 20 February 2023, Michael Gove, Secretary of State at the Department for
Levelling Up, Housing and Communities referred to the possibility of
legislation being including in the King’s Speech:

We hope, in the forthcoming King’s Speech, to introduce legislation to
fundamentally reform the system. Leaseholders, not just in this case but in so
many other cases, are held to ransom by freeholders. We need to end this
feudal form of tenure and ensure individuals have the right to enjoy their own
property fully.

More information can be found in the Library briefing, Leasehold and
commonhold reform and the constituency casework article Leasehold reform
in England and Wales: What’s happening and when?

https://commonslibrary.parliament.uk/research-briefings/cbp-8047/

https://commonslibrary.parliament.uk/leasehold-reform-in-england-and-wales/

 

The King has just confirmed – ‘My ministers will bring forward a bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold and tackling the exploitation of millions of home owners through punitive service charges’

That is all the information we have so far. The Government is expected to publish more details as soon as the speech is over. More updates to follow.

Updates on the proposed changes to leasehold law to follow

Today the King opens Parliament and in the King’s Speech we will find out what the Government is planning for Leasehold Law. More updates to follow…