What's changing

Leasehold reform

11 Dec 2023

3 minutes read

The UK government has introduced legislation to make long-term changes intended to improve homeownership for leaseholders and freeholders. Find out what’s changing.

The proposals

Leasehold and Freehold Reform Bill

The bill implements commitments to take forward many of the leasehold reform recommendations made by the Law Commission in its 2020 reports.

The government has said the bill will:

make it cheaper and easier for leaseholders in houses and flats to extend their lease and buy the freehold
increase the standard lease extension term to 990 years, with ground rent reduced to a peppercorn (zero financial value), upon payment of a premium
change the qualifying criteria to give more leaseholders the right to extend their lease, buy their freehold and take over management of their building
improve the transparency of service charges and ensure leaseholders receive key information on a regular basis
give leaseholders a new right to request information about service charges and the management of their building
improve the transparency of administration charges and buildings insurance commissions
ensure leaseholders are not subject to any unjustified legal costs and can claim their own legal costs from their freeholder
give freehold homeowners who pay charges for the maintenance of communal areas and facilities on a private or mixed-tenure residential estate, the right to challenge the reasonableness of charges and the standard of services provided
improve the transparency of estate charges and ensure freehold homeowners receive key information on a regular basis
ensure a rent-charge owner is not able to take possession or grant a lease on a freehold property where the rent charge remains unpaid for a short period of time

The government has stated the bill will also rebalance the housing system for 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 two years before they can extend their lease or buy their freehold

Not all of these proposals are included in the bill currently. The government has pledged to amend the bill as it makes its way through parliament to ensure it delivers on the full range of commitments set out above.

Alongside the bill, the government launched a consultation seeking views on options to restrict ground rents for existing leaseholders.

Subject to that consultation, the government will look to introduce a ground rent cap through the bill.

The bill is the second part of a legislative package to reform leasehold law. It follows the Leasehold Reform (Ground Rent) Act 2022, which put an end to ground rents for most new residential leasehold properties in England and Wales.

What this means for solicitors

Because the leasehold issue has been highlighted in the media and by the government, those buying flats are becoming more aware of the issues and what they need more information about.

Research by the Solicitors Regulation Authority provides information about the views of buyers about the information they were given by their solicitor during the purchase process.

It mentions, for example, that solicitors should be providing buyers with more information about the difference between leasehold and freehold properties.

The status of whether a property is freehold or leasehold is contained in the National Trading Standards guidance for estate agents as to the matters that should be revealed in marketing information.

You can share our existing guidance on buying and owning a leasehold home – a guide for the public you can share with your clients.

Our view

We want the leasehold system to operate fairly for leaseholders and not cause delays in the home buying and selling process.

We support the general commitment in the bill to make it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold.

The bill does not currently deliver on the government’s commitment to ban the sale of new leasehold homes. We would support an amendment to add this to the bill.

We welcome the proposals to require more transparency for both financial and non-financial information provided on leaseholders’ service charges. Providing these in a standardised format for service charges is a useful step. The information should be offered in ways that are accessible and easily understandable for consumers.

We support the proposals to create more transparency and regulation in relation to estate management, but we are disappointed that more regulation of managing and other property agents is not included.

We would support maximum fees for home buying and selling services provided by managing agents/freeholders with some caveats.

The proposals in the bill would make it easier for solicitors and conveyancers to provide transparency when consumers are looking to establish the costs involved in their purchase.

We support the aim to reduce ground rent to a peppercorn (effectively zero financial value).

What’s changing

December 2023 – the Leasehold and Freehold Reform Bill had its second reading on 11 December, where its main principles were debated

November 2023 – the king’s speech included proposals for a Leasehold and Freehold Reform Bill and a consultation on capping ground rent

June 2022 – the Leasehold Reform (Ground Rent) Act 2022 came into force for most new leases

November 2019 – the Conservative Party manifesto pledged reforms to leasehold, including banning new leasehold homes, restricting ground rents to a peppercorn and creating redress mechanisms for tenants