Leasehold Reform – where are we now?
During the first King’s Speech of the new Labour Government on 17 July 2024, the Government announced that over the next year they are going to introduce a draft piece of legislation called the “Leasehold and Commonhold Reform Bill” (“LCR Bill”).
During the parliamentary discussions of the new Leasehold and Freehold Reform Act 2024 (“2024 Act”) (which obtained Royal Assent on 24 May 2024) the Labour party members consistently argued that the Conservatives (the then Government) needed to go further with leasehold reform. In particular, a move to Commonhold.
Since coming into Power in early July 2024, it seems that the new Labour Government plan to do this.
Their plans for their new LCR Bill, which is only a draft, includes:
- Restricting the sale of new leasehold flats and reinvigorating Commonhold tenure
- Regulating ground rents (but not necessarily abolishing them)
- Ending forfeiture – where leaseholders can lose their flats for debts as low as £350
- Implementing the Law Commission’s recommendations on lease extensions, freehold purchases and Right to Manage.
The fact that the LCR Bill is only a “draft” suggests that there is no expectation that this Bill will be passed in the next year. This clearly makes sense, as it will no doubt be a highly complex piece of legislation. It will take many months to draft the Bill and thereafter it will need to be scrutinised with utmost care. Whilst it is difficult to anticipate when and if the Bill will become law, it unlikely to happen much before 2026, or even later.
Commonhold allows for freehold ownership of a single property (known as a commonhold unit; for example a flat) within a larger development, plus membership of a company (the commonhold association) that owns and manages the common parts of the development (for example, communal gardens, communal staircases etc). This ensures that the unit-holder (ie. the flat owner) is, together with their fellow unit-holders, in control of the development.
While commonhold seemed to offer many benefits, it has not been popular over the last 15 years, highlighted by the fact that there has been less than 20 commonhold developments. Explanations for this include that the procedures, for example to establish the commonhold, are complex and that some lenders are unwilling to lend on commonhold security. Also currently, conversion from an existing leasehold building to commonhold is almost impossible to achieve as it requires the unanimous agreement of nearly every interested party in the building, including the freeholder, all leaseholders and every lender with a mortgage secured over the properties. Commonhold may therefore currently be out of reach for most leaseholders.
Whilst the draft Bill is good news for leaseholders generally, for those wanting to extend their leases or purchase their freeholds now – this proposed new reform is a mixed blessing.
Many leaseholders have been waiting to benefit from the provisions of the existing 2024 Act. However, the 2024 Act needs more work before it can be implemented. This includes setting the rates that are used to determine how much lease extensions will cost.
While the Government are promising to implement this, the new LCR Bill could easily become a distraction from doing this – i.e. how much effort will the Government want to invest in implementing Conservative reform, when they intend to start again anyway with a proposed move to Commonhold?
The announcement of the new draft Bill will go beyond the 2024 Act, but we don’t know exactly what it will do. However, what we do know is that anything included in the 2024 Act will also likely be included in the new legislation too. Again, we do not know when the new LCR Bill will be implemented or whether the existing 2024 legislation will come into force as part of the new Bill or be implemented before.
If you are a tenant looking to extend your lease, or if you are a Landlord on the receiving end of a request to extend a lease, Taylor Walton have a designated Commercial Property Department with experienced solicitors that will be able to help you with what is becoming an ever increasing complex area of law. To make contact with one of the team please send us your details via our online form.
Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.
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