LATEST NEWS & UPDATES
 

MAY 2024

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Leasehold Reform

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THE LEASEHOLD AND FREEHOLD REFORM BILL

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The Earl of Lytton subsequently withdrew his proposed Building Safety Remediation Scheme amendment to this Bill, but with the proviso that he may return to it at the Report Stage of the Bill

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As the Committee Stage of the Bill has now ended, it was due to move on to the Report Stage in the House of Lords on 5 June

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THE RESTRICTION ON GROUND RENTS CONSULTATION

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Lee Rowley, the Minister for Housing, in response to a written question responded as follows:-

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"The Government’s consultation on restricting ground rents for existing leases ran from 8 December to 17 January.

Whilst we will publish a full response shortly, we can confirm that the general response to the consultation has confirmed that ground rents represent, at most, a small percentage of total UK pension assets. In addition, no substantive evidence has been provided within the consultation that suggests that there is a systemic risk to the operation of pension funds or the financial markets. Even the sector itself, in its so-called “option 6” alternative, has recognised the necessity of reform in this policy area.

Having concluded the consultation and reviewed the responses provided, we intend to set out the future proposed approach in this policy area shortly."

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THE RENTERS REFORM BILL

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This completed its Second Reading in the House of Lords and it was due to move on to the Committee Stage 

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GENERAL ELECTION CALLED

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The Government called a General Election for 4 July 2024

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The result of this is that:-

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(1) the Renters Reform Bill has been lost

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(2) The Leasehold and Freehold Reform Bill was saved via the 'Wash-up Procedure', but that allowed no time for the introduction of major changes (such as restrictions upon Ground Rent) or for proper debate

 

The Bill has now received Royal Assent and is the Leasehold and Freehold Reform Act 2024. Some parts of the Act will come into force on the 24 July 2024, but many are dependent upon secondary legislation/regulations being put into place, so may take some time to apply

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Edited highlights of some of the provisions of the Leasehold and Freehold Reform Act 2024 follow:-

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- the extended term to be granted under Statutory Lease Extensions will now be 990 years for Houses and Flats (plus the term remaining under the current Lease)

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- the requirement that a Leaseholder must have owned the Lease for 2 years before being able to seek a Statutory Lease Extension has been removed

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- Marriage Value has been removed for the purpose of calculating the price to be paid by the Leaseholder for a Statutory Lease Extension where the existing Lease has less than 80 years to run

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- as regards to the capitalised value of the Ground Rent payable under the Existing Lease, it is to be assumed to be capped at 0.1% of the market value of the property - secondary legislation will need to be enacted to deal with capitalised rates and deferment rates

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- the sale of new Leasehold Houses has been banned, save in exceptional circumstances

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- Leaseholders will have a new right to reduce their Ground Rent to a peppercorn, upon payment of a premium to their Landlord, without having to extend their Lease

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- restriction introduced the extent to which Landlords can recover costs

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- requiring service charge demands to be issued in a standardised format, for greater transparency and imposing duties upon Landlords/Management Companies in relation to the provision of service charge accounts, including the introduction of a 6 month period from the service charge year end in which to produce such accounts

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- limiting the extent of recovery of insurance costs

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- in the case of Leaseholders wishing to exercise the Right to Manage, increasing the non-residential threshold limit from 25% to 50% (so more Leaseholders will have the ability to exercise the Right to Manage)

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- regulations to be introduced to place an obligation upon Landlords to respond to 'sales information requests' within a specified timeframe and at a specified cost

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- a new an extended Leasehold and Estate Management redress scheme where poor practice can be challenged

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N.B. the Act contains no provisions dealing with the capping of Ground Rents

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The Act also contains a number of provisions to benefit owners of Freehold Houses on Estates where they are required to pay a Rentcharge/Service Charge, and imposing similar obligations and giving them similar powers as are available to Leaseholders

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