Leasehold Reform Gathers Pace

13 March 2024 | Written by Beverley Kloos

Innovus Insights

As we get ready for an election, leasehold reform remains high on the government agenda – and as a hot topic for the property industry. Our Director of Asset Management, Felix Keen, explains what the new proposals could mean for leaseholders and freeholders.

As the Leasehold and Freehold Reform Bill makes its way through the House of Lords, the debate is heating up. When enacted, it will have significant ramifications for the whole of our industry, but what will it mean for leaseholders and freeholders?

The Bill is proposing the following main provisions.

Leases and ground rents

Increasing the standard lease extension terms from 50 years for houses and 90 years for flats to houses to 990 years for both. Ground rent to be reduced to a ‘peppercorn’ (basically a zero financial value).

More leaseholders will also have the right to extend their lease and buy their freehold. A ban on selling new leasehold homes has had to be added as an amendment as it was left out in the original drafting.

Consumer rights

Introduction of standardised and more transparent service and estate charge collection and the banning of insurance commission (which would be replaced with a transparent administration fee).

Property management

Increased powers for leaseholders to be able to bring cases against freeholders and take over the management of their building, where, for example, maintenance has been neglected.

Freehold homeowners paying charges for communal area maintenance will also finally have the right to challenge the fairness of charges and the standard of services provided by their property manager.

The debate so far has been lively with both the Government and Opposition supporting the Bill. It has drawn focus as much for what has been omitted as for what has been included. It has also shone a light on managing agents, with significant discussion on the lack of regulation.

The Bill is an ambitious piece of legislation. And there is more change yet to come when the future of ground rents is decided. There is still some way to go to before becoming law, so we could see more changes to the current proposals. What’s already clear is that there are huge ramifications for both leaseholders and freeholders alike.


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