The Leasehold and Freehold Reform Bill

The Leasehold and Freehold Reform Bill 2023-24 was introduced to the House of Commons on 27 November 2023 and applies to England and Wales.  At the time of writing, the Bill is in the Report Stage in the House of Commons.

The Government has indicated that it intends to introduce amendments to the Bill as it is considered through the various stages in Parliament.  The consultation which sought views on options to restrict and cap ground rents for existing leases will factor into the Government’s considerations within the Bill.

The main provisions of the Bill are:

• Increase the standard lease extension term for both houses and flats to 990 years, with ground rent reduced to a peppercorn on payment of a premium. The current standard is an extension of the term by 90 years in respect of flats and 50 years in respect of houses.
• Remove ‘marriage value’ which is the increase in a property’s value following completion of a lease extension.
• Remove the requirement for a leaseholder to have owned their house or flat for 2 years before they can claim an extension to their lease.
• Increase the 25% non-residential limit preventing leaseholders in buildings with a mixture of property uses (e.g. residential and shops, offices etc.) from buying their freehold or taking over management of the building to allow leaseholders in buildings with up to 50% non-residential floorspace to buy their freehold or take over management.
• Require transparency over service charges for leaseholders.
• Replace buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees.
• Remove the assumption that leaseholders are to pay the freeholder’s legal costs when challenging poor practice.
• Grant 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.
• Ensure a rentcharge owner is not able to take possession or grant a lease on a freehold property where the rentcharge remains unpaid for a short period of time.

The following provisions do not appear in the Bill as introduced to Parliament, however, as set out above the Government may introduce amendments to the Bill:

• Ban the creation and sale of new leasehold houses so that every new house in England and Wales would be freehold from the outset, except in exceptional circumstances.
• Set a maximum time and fee for the freeholder to provide the information required to make a sale.
• Require freeholders who manage their building directly to belong to a redress scheme.
• Extend measures in the Building Safety Act 2022.