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What to expect from the Leasehold and Freehold Reform Bill

The ‘Leasehold and Freehold Reform Bill’ is the second part of the Governments legislative package to reform the property system in England and Wales and follows on from the Leasehold Reform (Ground Rent) Act in 2022 which prohibited ground rents for new qualifying residential Leases.

The bill was introduced to Parliament on 27th November 2023 and aims to  further address the challenges and complexities associated with Leasehold ownership by introducing new reforms designed to rebalance the Leasehold system, benefiting homeowners, and bringing about increased transparency and greater fairness.

Some significant changes of note are: –

  • A ban on new leasehold houses in England and Wales.
  • Setting a maximum fee and timescale for the provision of commonly sought after information required as part of the conveyancing process by a Landlord to the Leaseholder
  • The removal of the ‘Marriage Value’ which can make it more expensive to extend Leases with a term of less than 80 years.
  • The removal of the two-year ownership requirement before a new Leaseholder can extend their Lease or buy their Freehold.
  • Extending the standard statutory Lease extension term from 50 years (for a house) and 90 years (for a flat) to 990 years, with ground rent reduced to a peppercorn upon payment of a premium.
  • Increasing transparency over Leaseholders service charges by requiring Freeholders (or Managing Agents) to issue bills in a standardised format
  • Increasing the non-residential limit from 25% to 50%, providing Leaseholders in buildings with up to 50% non-residential floorspace the right to buy their Freehold/ take over its management (via Right to Manage and Collective Enfranchisement).
  • Imposing a requirement on Freeholders who manage their building directly to join a redress scheme so Leaseholders can challenge them, if necessary (Managing Agents are already required to belong to such a scheme).
  • Granting Freeholders of private and mixed-use estates the same rights of redress as Leaseholders, providing Freehold homeowners the right to receive more information about what service charges they pay, and the right to challenge these charges via a Tribunal.
  • Removal of the presumption that the Leaseholder is liable for the freeholder’s legal costs when challenging poor practice.

At this stage it is not clear if all (or any) of the proposed reforms will be passed as the Bill makes its way through Parliament, but clearly in its current state the Leasehold and Freehold Reform Bill could have far-reaching implications for Leaseholders, Freeholders, and the property market as a whole.

The property team here at Mercers will be keeping a close eye on the progress of the Bill, and any amendments or updates to it.

Written by Lauren Edwards, Paralegal in the Property department.

If you have any questions relating to the above article please do not hesitate to contact us, our team of expert solicitors are on hand to help.

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