Latest guidance on leasehold reform


December 1, 2023

Latest guidance on leasehold reform and what this could mean for the future (Nov 2023). This article discusses the Leasehold and Freehold Reform bill for England and Wales from King Charles’ speech on 7th November 2023.

First of all, we must understand what it meant by a leasehold estate. A leasehold estate is where a proprietor (leaseholder) owns the right to occupy the land for a specific term. They do not have sole legal ownership to the land, unlike a freeholder who owns the land that the property is built on in its entirety. The freeholder of a leasehold estate is commonly referred to as the “landlord”.

We have already seen the Leasehold Reform (Ground Rent) Act 2022 reduced ground rents to zero for new leases in England and Wales after 30th June 2022. But what of the other leasehold reforms the Government announced at the beginning of 2021 that are making progress? 

On 7th November 2023, King Charles III announced:

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 tackling the exploitation of millions of homeowners through punitive service charges.’

Whilst we await publication of the draft bill, the King’s Speech Briefing Note outlines the following:

  • Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold.
  • Increasing the statutory lease extension term from 90 years to 990 years for both houses and flats, with ground rent reduced to £0.
  • 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% ‘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% non-residential floorspace to buy their freehold or take over its management.
  • Banning the creation of new leasehold houses so that (other than in exceptional circumstances) every new house in England and Wales will be freehold from the outset.
  • Consult on capping existing ground rents, to ‘ensure that all leaseholders are protected from making payments that require no service or benefit in return, have no requirement to be reasonable, and can cause issues when people want to sell their properties.’  Subject to that consultation, a cap is likely to be introduced through this Bill.

Although the Government has announced that they are committed to introducing further reforms, there is currently no guarantee of what will be introduced. Therefore, a leaseholder with a short lease may be well advised not to wait to extend their lease for this reason.

W Davies has a dedicated team of Property Solicitors. If you would like to discuss a leasehold matter, whether you are intending to purchase a lease, extend a lease or buy a freehold of the building, you can get in touch with our Property Solicitors.

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If you have any questions or need assistance with any of the issues raised in this article please contact us and we will be happy to help.