New Labour Government proceed with Leasehold Reforms

The new Labour Government is planning to go further than the previous Tory government's Leasehold and Reform Bill, which was one of the last pieces of legislation to pass through parliament before the General Election.

Following the much-anticipated Kings’ Speech yesterday, Labour has promised to tackle the difficult issue of leasehold and freehold reform. The announcement stated they will commit to the previous Conservative government’s recent legislation, which got through the wash-up period pre-election process (the last few days of Parliament before dissolution), but also plan to reform the existing leasehold system even further.

This includes implementing the Law Commission’s recommendations relating to leasehold enfranchisement, which will see leaseholders granted greater rights to extend their lease and/or buy the freehold and take over the freeholder’s building management functions or ‘right to manage’.

The Government also says it wants to tackle high ground rents and remove the “disproportionate and draconian threat of forfeiture as a means of ensuring compliance with a lease agreement”.

Furthermore, Labour is promising to take steps to “bring the feudal leasehold system to an end”, reviving commonhold through a new legal framework and banning the sale of new leasehold flats so “commonhold becomes the default tenure”.

The briefing which followed yesterday’s King’s Speech, also stated that Labour wants to bring the injustice of ‘fleecehold’ private estates and unfair costs to an end, promising a consultation on the best way of achieving this.

“We estimate that 86% of leaseholders pay a ground rent, averaging almost £300 per year in England,” the document says.

“Ground rent contracts that rapidly escalate can become unaffordable over time for leaseholders.

“In a recent survey undertaken by Propertymark, a leading membership body for property agents, 78 per cent of their members reported that a leasehold property with an escalating ground rent will struggle to sell, even if priced correctly.”

Ian Fletcher, Director of Policy (Real Estate) at the British Property Federation (BPF), said: “Leasehold reform is a complex area of the law which requires careful consideration, and we are supportive of the Government taking time to consider the best way forward, which must be done carefully and holistically.

“That means ensuring that other flaws in the system, such as an unregulated managing agent sector, are remedied. Any expansion of commonhold will work best if it has the confidence of developers.

“Responsible freeholders support reforms that make leasehold work better and would welcome dialogue with the new Government on this issue.”