The King’s Speech on 7 November 2023 proposed reform through the planned Leasehold and Freehold Bill which is due to be put in front of Parliament later this month. The Bill is intended to make it cheaper and easier for more leaseholders to extend their lease, buy their freehold, and take over management of their building. This note will summarise the main points in these areas that were addressed.
What is the current position?
- Leaseholders must be the registered proprietor of their property at the Land Registry for 2 years before qualifying for a lease extension.
- The standard lease extension term is 90 years under the Leasehold Reform Housing and Urban Development Act 1993.
- Buildings where more than 25% of the floorspace is occupied for ‘non-residential’ purposes are ineligible for collective enfranchisement or right to manage claims.
- Many new-build homes are sold with leasehold rather than freehold title.
- Ground rents are uncapped, leaving many leaseholders with steep doubling clauses, or rent review clauses based on RPI.
What are the proposed reforms?
- Removal of the requirement for a leaseholder to have been the registered proprietor with the Land Registry for two years.
- Increase the standard lease extension term from 90 years to 990 years.
- Increase the 25% ‘non-residential’ limit to 50% in buildings with a mixture of residential and ‘non-residential’ floorspace.
- Ban the creation of new leasehold houses so that all new houses will be sold with freehold title (except in exceptional circumstances).
- Consult on capping existing ground rents.
How will this affect you?
- Removing the two-year ownership requirement will mean new owners of leasehold properties will be able to benefit from a 990-year lease and £0 ground rent as soon as possible.
- Increasing the standard lease extension term to 990 years will remove the hassle and cost of future lease extensions.
- Increasing the 25% non-residential floorspace limit will allow leaseholders in buildings where more than 25% of the floorspace is occupied for ‘non-residential’ purposes to be eligible for collective enfranchisement and right to manage claims. This will increase the number of leaseholders who will be able to own and manage their buildings.
- By largely banning the creation of new leasehold homes, homeowners will own their properties outright from the get-go, thereby saving the expense and hassle of freehold acquisition claims.
- This consultation is seeking views on capping ground rents in residential leases. The consultation period is open and will close on 21 December 2023. Now is the time to have your say: https://consult.levellingup.gov.uk/leasehold-reform/38011950/ . Note, this is a consultation only of which there will be many competing interests to consider.
Please do not hesitate to get in touch if you have any questions or concerns about the contents of this note, or the wider contents of the Kings Speech.
Streathers Solicitors LLP
10 November 2023