Leasehold & Freehold Reform Act becomes law

On Friday 24 th May, the Leasehold and Freehold Reform bill was one of the last pieces of legislation to pass through Parliament, before it shut down due to the General Election which is taking place on 4 th July.

Homeowners will now receive more power, rights and protection over their homes under the Leasehold and Freehold Reform Act. However, the much-lauded plans to remove ground rent for existing leaseholders or cap it at £250 were dropped when the new legislation was passed on Friday.

It has been described as a “muted win” as whilst the final bill was originally aimed to remove responsibility for building repairs on leaseholders and reducing ground rents to a peppercorn rate, it does not include a cap on ground rents.

Another key omission from the bill was the prevention of forfeiture. A measure that allows a freeholder to repossess a flat for a debt of just £350.

Many of the changes included in the bill will not come into effect immediately or even have a specified timeline. This included the welcome banning of leasehold houses, and also abolishing marriage value which could make it cheaper for leaseholders with fewer than 80 years left to extend their leases.

Michael Gove – the Housing Secretary, who announced last week that he will be stepping down as an MP, originally wanted to cap ground rents at a low nominal level.

Industry reaction to the recently passed act includes the following:-

Head of Policy and Campaigns at Propertymark - Timothy Douglas, commented: “The recently passed leasehold legislation is far from perfect, but it is the start of reform to outdated legislation that was not fit for purpose.

“Once implemented the new laws will make it more commonplace to extend a lease and information about leasehold property will be made more transparent, which will make buying, selling and renting leasehold property easier.

“However, the legislation is a missed opportunity to tackle some key issues. Propertymark argued that the legislation needed to go further to incorporate the recommendations for the Regulation of Property Agents. At a time where building safety regulations have increased and become more complex, it is shortsighted that policy makers were unwilling to see the benefit to consumers of qualifying and licensing the competency of those who work in the property sector.”

A spokesperson for The Residential Freehold Association, remarked: “The Leasehold and Freehold Reform Bill is a defective and poorly evidenced piece of legislation which has ignored the outcomes of consultation with industry and leaseholders alike.

“The Government has pushed this Bill through without proper scrutiny and as a result there is work to be done to ensure there are no unintended consequences that will negatively impact leaseholders.”

Founder of the National Leasehold Campaign Katie Kendrick said it was a “real missed opportunity” that the Government did not manage to introduce a cap on ground rents, something they repeatedly promised but failed to deliver.

Co-founder Cath Williams, added: “There is lots to celebrate in the bill, most notably the removal of marriage value. This will save leaseholders with less than 80 years on their lease thousands of pounds in lease extension fees. We have had lots of comments in our campaign group who are crying with joy. This is truly life-changing for leaseholders with short leases.”

There is a good chance that secondary legislation could be introduced to bring in a ground rent cap and improve the law, but that is likely to depend on the new Government’s priorities.