In his first King’s Speech, King Charles confirmed that the government intends to bring forward reforms to the leasehold system as opposed to scrapping it altogether as housing secretary Michael Gove had previously hinted.
The King said: “My ministers will bring forward a bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold and tackle the exploitation of millions of homeowners through punitive service charges.”
In January this year, Gove told the Sunday Times: “I don’t believe leasehold is fair in any way. It is an outdated feudal system that needs to go and we need to move to a better system and to liberate people from it.”
In July, however, Gove appeared to row back from his stance. “We will continue action on exploitative ground rents, expand leaseholders’ ability to enfranchise and to take back control from distant freeholders,” he said.
“We will reduce punitive legal service charges, reduce insurance costs and improve transparency.”
The Property Institute has welcomed the announcement of the Leasehold and Freehold Bill, detailed below, including measures to make it cheaper and easier for leaseholders to extend their lease, buy their lease, and take over management of their building, and measures to improve transparency of service charges.
In notes released following the King’s Speech, the government said the Leasehold and Freehold Reform Bill would empower leaseholders by:
- Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold – so that leaseholders pay less to gain security over the future of their home.
- Increasing the standard lease extension term from 90 years to 990 years for both houses and flats, with ground rent reduced to £0. This will ensure that leaseholders can enjoy secure, ground rent free ownership of their properties for years to come, without the hassle and expense of future lease extensions.
- Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes – so that more leaseholders can exercise their right to the security of freehold ownership or a 990-year lease extension as soon as possible.
- Increasing the 25 percent ‘non-residential’ limit preventing leaseholders in buildings with a mixture of homes and other uses such as shops and offices, from buying their freehold or taking over management of their buildings- – to allow leaseholders in buildings with up to 50 per cent non- residential floorspace to buy their freehold or take over its management.
In terms of Improving leaseholders’ consumer rights, the notes said that the bill will do this by:
- Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee for the provision of information required to make a sale (such as building insurance or financial records) to a leaseholder by their freeholder (known as ‘landlords’).
- Requiring transparency over leaseholders’ service charges – so all leaseholders receive better transparency over the costs they are being charged by their freeholder or managing agent in a standardised comparable format and can scrutinise and better challenge them if they are unreasonable.
- Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees – to stop leaseholders being charged exorbitant, opaque commissions on top of their premiums.
- Extending access to “redress” schemes for leaseholders to challenge poor practice. We will require more freeholders to belong to a redress scheme so leaseholders can challenge them if needed.
- Scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.
- Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders – by extending equivalent rights to transparency over their estate charges, access to support via redress schemes, and to challenge the charges they pay by taking a case to a Tribunal, just like existing leaseholders.
- Building on the legislation brought forward by the Building Safety Act 2022, ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work – protecting leaseholders by extending the measures in the Building Safety Act 2022 to ensure it operates as intended.
Andrew Bulmer, CEO of The Property Institute, said: “For far too long leaseholders have had to deal with a complex and out-dated system that often doesn’t work well for them. Property managers see the problems with the leasehold system daily, and we strongly welcome this much-anticipated bill.
“Comprehensive leasehold reform would enable property managers to work more closely with residents to deliver a high-quality service which is more responsive to their needs. It would also empower leaseholders to take responsibility for decisions affecting the buildings and communities they live in.
He added: “While the proposals set out so far are a good start, we urge the government to be more ambitious and introduce regulation of property managers and mandatory qualifications, to raise standards and improve competency across the sector. This will protect leaseholders from poor practice and unnecessary costs.”
Elsewhere in his speech, King Charles also said that the government would introduce reforms to the private rented sector.
“Renters will benefit from stronger security of tenure and better value, while landlords will benefit from reforms to provide certainty that they can regain their properties when needed,” he said.
In the accompanying notes, the government made clear that strengthening landlords’ rights would precede reforms for the benefit of renters.
It said that the Renters (Reform) Bill will support the 11 million private tenants and 2.3 million landlords in England by:
- Strengthening landlord grounds for possession, adding new mandatory grounds for possession; for example, if landlords wish to sell property or for repeated serious rent arrears, as well as expanding grounds for when close family members wish to move in. If a tenant breaches their tenancy agreement or damages the property, landlords will be able to evict them in as little as two weeks.
- Delivering the Government’s manifesto commitment to abolish ‘no fault evictions’, increasing tenants’ security. We will not commence the abolition of section 21 until stronger possession grounds and a new court process is in place.
Read the full King’s Speech Briefing Notes here.
