The Leasehold and Freehold Reform Bill receives its first reading

The Leasehold and Freehold Reform Bill received its first reading in the House of Commons representing the Government’s next step in Leasehold Reform. However, this highly technical Act may fail to live up to earlier promises of radical change in this area. 

It has been nearly 18 months since the Leasehold Reform (Ground Rent) Act 2022 came into force. During the debates there were calls for more substantial changes to the leasehold system. At one point, followed by a swift U-turn, the Government proposed the complete abolition of leasehold. The Leasehold and Freehold Reform Bill represents a more measured approach to reform.

The Bill does propose significant changes in connection with lease extensions and enfranchisement, particularly:

• The removal of the requirement that leaseholders must own their property for two years before being able to claim a lease extension.
• The statutory lease extension claim to be for 990 years instead of 90 years in addition to the unexpired term.
• Changes to the calculation of the premium, for lease extensions and enfranchisement claims.
• Changes to the costs the Landlord can recover during the lease extension and enfranchisement process.

In addition, there is a new claim, where a leaseholder can require their rent be replaced with a peppercorn rent (effectively nil). Unlike what has been promised this is not equate to the complete removal of ground rents for existing leaseholds, particularly as there will be a premium associated with this application.

Those who manage residential buildings will find themselves facing a new regime with changes to the format of service charge demands, requirements for annual reports and accounts and significant new regulation of the administrative fees, particularly relating to insurance and providing information packs when leaseholders come to sell. The emphasis is on transparency of these fees and publishing of fee schedules but does not seek to introduce any cap or limit on the actual fees. 

There are also changes to the Right to Manage procedure, estate management and rent charges.

The approach has been to amend the existing legislation which, in some way, acknowledges the system is not entirely broken. However, this is only the first reading and much will, undoubtedly change in the course of its journey through Parliament which will no doubt result in disappointment for those seeking a more radical reform.