Leasehold and Freehold Bill

On 7 November 2023, The King’s speech formed part of the state opening of parliament, and opened what will be the final session before the next general election.

The speech included 21 bills, of which six have been carried over from the previous session, and two had been previously published in draft form.

Of note were the proposals to introduce a Leasehold and Freehold Bill that will ban leaseholds for new houses, but not new flats, in England and Wales, whilst increasing the standard lease extension period to 990 years.

The three main objectives of the Bill were highlighted as;

• Empower existing leaseholders by making it cheaper and easier for them to extend their lease or buy their freehold. This includes:
  • increasing the standard additional term of lease extensions from 90 years to 990 years;
  • removing the two-year ownership requirement for leaseholders who wish to extend their lease or buy the freehold;
  • allowing leaseholders in mixed use buildings with up to 50% commercial use to buy their freehold or take over the management of the building, an increase from the current limit of 25%.
• Improve the consumer rights of leaseholders by:
  • setting a maximum time and fee for the provision of management information by the freeholder when a leaseholder is selling their property;
  • making service charges more transparent and replacing buildings insurance commissions with a transparent administration fee;
  • expanding redress schemes and removing the presumption that leaseholders pay the freeholder’s legal costs when challenging poor practice;
  • granting freehold homeowners on private and mixed-tenure estates the same rights of redress as leasehold tenants, in relation to estate charges. For more information, see DLUHC, Freehold estates (3 November 2023)Opens in a new window; and
    ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work under the Building Safety Act 2022.
• Reform the leasehold market by banning the creation of new leasehold houses in England and Wales, other than in exceptional circumstances.

The announcement was met with mixed responses, with the National Leasehold Campaign (NLC) welcoming the inclusion of leasehold reforms, whilst also stating the proposals do “not go far enough”.

During the speech, the government also unveiled its intention to consult on capping existing ground rents, saying that it wants to ensure leaseholders don’t have to pay for unnecessary services and that charges are reasonable and no longer cause an issue when people come to sell.