Is leasehold being abolished?

The Leasehold and Freehold Reform Bill was introduced to Parliament on 27 November 2023 and is intended to give leaseholders a fairer deal, making it easier and cheaper to claim an extended lease or buy the freehold, and giving them greater rights and protections.

The Bill does however fall short of abolishing leasehold, despite Michael Gove’s earlier statements. Notably, it clarifies “abolishing leasehold houses” to relate only to leases of newly built houses, which was another government pledge. Nevertheless, the Bill represents the most significant reform to the leasehold system for a generation.

The key proposals are as follows:

Introducing a new standard valuation method, and so making it cheaper for leaseholders to extend their leases or buy the freehold (both in terms of reducing the price payable and removing the obligation to pay the freeholder’s costs).
Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years for houses and 90 years for flats), so that leaseholders can enjoy more secure ownership without the trouble and expense of repeat lease extensions.
Giving leaseholders greater transparency over their service charges by making freeholders issue bills in a standardised format that can be more easily scrutinised and challenged.
Making it easier and cheaper for leaseholders to take over the management of their building, and so allowing them to appoint their own managing agent.
Making it cheaper for leaseholders to exercise their enfranchisement rights by abolishing the obligation to pay the freeholder’s costs incurred in connection with a claim.
Making it easier for leaseholders to challenge poor practice by obliging those freeholders who manage their own properties to belong to a redress scheme.
Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee for providing home buying and selling information.
Granting homeowners on private and mixed tenure estates comprehensive rights of redress so that they receive more information about what charges they pay and have a greater ability to challenge them.
Giving greater rights to those in mixed use blocks so that in buildings where no right to enfranchise exists because more than 25% of its floor space is commercial, the limit is increased to 50%. This will give more leaseholders the right to manage or the right to collectively claim their freehold.
Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house will be freehold from the outset.
Removing the requirement for a leaseholder to have owned their house or flat for two years before they can extend their lease or buy their freehold.

The Bill forms part of the government’s long-term plan for housing and delivers the government’s manifesto commitments on leasehold reform.

The government is also consulting on options to cap ground rents for existing leases and so protecting leaseholders from unregulated ground rents for no service in return.

There is, however, likely to be a challenge by landlords, particularly the larger estates and also pension funds and charities, to ground rent caps which will deprive them of income.

Landlords are also likely to challenge the proposed standard valuation method which will deprive them of an additional element of value, known as marriage value, which applies where the unexpired term of the existing lease has dropped below 80 years. Other elements of the proposed standard valuation will also make it cheaper to claim an extended lease or a freehold, but again are likely to be challenged by landlords who will argue that they are not being properly compensated for the loss of their property. Human Rights arguments are likely to be deployed.

It may accordingly be the case that the Bill will stall or that it will be enacted in a pared down form while these challenges are addressed.

If you have any questions regarding The Leasehold and Freehold Reform Bill or how it may apply to you please contact Katherine Simpson or any member of the property team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.

Please also see a copy of our terms of use here in respect of our website which apply also to all of our blogs.