The Leasehold Scandal, A Suboptimal Conclusion?

Hello Readers,

What a week! We’ve seen a snap election called, the renters reform bill thrown away (however, I suspect it will quickly be revived), a wash up to finalise as much policy as possible before parliament is dissolved and in that, the leasehold reform bill having passed !

This is a huge deal, however in my view not perfect, but certainly a big step forward for leaseholders. We’re waiting for an implementation date, but it will save tens of thousands of people literally tens of thousands of pounds.

I first wrote about this policy back in January 2021 and in May 2023 I commented on how it looks like the policy has been pushed into the long grass. Revived as something of an election pledge, the bill resurfaced a couple of months ago.

Quoting from the press release, the Act which has received Royal Assent strengthens existing and introduces new consumer rights for homeowners by:

• Making it cheaper and easier for people to extend their lease or buy their freehold so leaseholders pay less to have more security in their home.
• Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats), so leaseholders can enjoy secure ownership without the hassle and expense of future lease extensions.
• Giving leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged.
• Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
• Making it cheaper for leaseholders to exercise their enfranchisement rights as they will no longer have to pay their freeholder’s costs when making a claim.
• Extending access to redress schemes for leaseholders to challenge poor practice. The government will require freeholders, who manage their building directly, to belong to a redress scheme so leaseholders can challenge them if needed – managing agents are already required to belong to a scheme.
• Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee that for home buying and selling information.
• Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.

In addition, the act will benefit leaseholders by:

• Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice that currently acts as a deterrent when leaseholders want to challenge their service charges.
• Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees.
• Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.
• Removing the requirement for a new leaseholder to have owned their house or flat for 2 years before they can extend their lease or buy their freehold.

The problem with this bill is that with it having been rushed through, corners have been cut. For example, the cap of ￡250 on ground rents was scrapped (most likely due to the level of opposition).

Whilst the bill is a step forward, it has been heavily criticised with just a few of the comments from various Peers noting how:

“This Bill is suboptimal, it’s not the revolution that many leaseholders across the country have been desperate for.”

• Conservative Lord Bailey of Paddington

“You’ve got a major piece of legislation that creates certain precedents and it’s being rushed through here without a moment’s notice.”

• Conservative Lord Howard of Rising

Labour peer Lord Roy Kennedy explained that the bill is “far, far short of what was promised”

Conservative peer Lord Daniel Moylan commented on how the bill was “being rushed through in the most reckless fashion”.

So, a suboptimal conclusion by the looks of things however for freeholders the bill does pose a problem and some companies have threatened to sue the government for interfering with the rights to their properties.

Another thing to consider here is how we’re quite likely to have a change in government, so the bill might (again) be subject to more tweaks I guess. Of this however, Labour’s shadow housing minister Matthew Pennycook has said that the party would “finally bring the archaic and iniquitous leasehold system to an end” if it gains power at the election.

What do you think to this bill? I guess it largely depends what side of the fence you sit! I suspect it will be phased in, but we’ll have to wait until after the election to find out.

Hasan