The Leasehold and Freehold Reform Bill was published at the end of November 2023. The Bill was introduced shortly after being signposted in the King’s Speech. It appears to be the intention to make some sweeping changes to leasehold law and residential block management.

As currently drafted, however, the Leasehold and Freehold Reform Bill falls short when it comes to some of the significant reforms to the residential leasehold system in England and Wales promised by Michael Gove and the UK government in recent years.

Leasehold and Freehold Reform Bill: What’s included?

Fundamentally, the Leasehold and Freehold Reform Bill aims to make it cheaper and easier for residential tenants to extend their lease or buy the freehold of their home. Key provisions included within the Bill include:

• An increase in the standard lease extension term for houses and flats to 990 years (up from 90 years in flats and 50 years in houses) and a reduction in ground rents to a peppercorn.
• Removal of marriage value from the cost calculation for leasehold enfranchisement [1].
• Removal of the existing requirement for a tenant to have owned their leasehold property for two years before they can extent their lease or buy the freehold.
• An increase in the percentage of non-residential floorspace (from 25% to 50%) which can be present in mixed-use buildings before residential tenants can buy their freehold or take over management of the building.
• Introduction of increased regulation and transparency, including the mandatory use of prescribed procedures and forms, in relation to service charges, rentcharges, administration charges and estate management.

Leasehold and Freehold Reform Bill: What’s missing or still to come?

The most glaring omission from the Bill is the government’s much-hyped pledge to ban leasehold tenure on the sale of newly built houses. The BBC has reported that the government will include the ban on leasehold tenure for new houses via amendments as the bill progresses through Parliament. There are also reports that some Conservative and Labour MPs would back amendments to expand such a ban to flats.

Whilst amendments are yet to be proposed, suggested alternatives in flat/apartment developments are share of freehold [2], or commonhold (see below).

Another area of reform which has been mooted for several years, and which is missing from the Bill as drafted, is commonhold [3]. The shadow housing minister has said that a Labour government would make commonhold the default tenure for all new builds.

Much of the detail surrounding the new provisions and procedures set out in the Bill also remains to be made via secondary legislation.

All in all, the issue of leasehold and freehold reform remains ‘one to watch’.

Leasehold and freehold reform and block management: How we can support you

Walker Morris’ dedicated Housing Management & Litigation team specialises in advising landlords, management companies, managing agents and leaseholders in relation to all aspects of residential leasehold law, practice and block management.

With leasehold and freehold reform being both a hot topic and a moving feast, we can help residential developers, operators and estate managers to keep on top of legal and regulatory developments.

We can provide proactive portfolio and risk management advice, including undertaking contract, lease and policy reviews; and provide legal, practical and procedural support in relation to enfranchisement processes, building safety and estate management generally.

If/when issues do arise, we can provide commercially focused and strategic dispute resolution advice.

For further advice, information or training on any aspect of leasehold and freehold reform or block management, please contact Karl Anders or any member of the team.

[1] Currently, when a tenant wishes to extend its lease or purchase the freehold, ‘marriage value’ is included in the cost it’s required to pay. Marriage value is the difference between the higher value of the property if it was in single ownership and the lower value of the property when it is owned separately by both a landlord and a tenant/leaseholder.

[2] Under share of freehold, flat-owners still have a lease, but they also own a share of the freehold, so they have greater control over how the building is managed.

[3] Commonhold is an alternative form of ownership to leasehold or freehold. It combines freehold ownership of individual flats or commercial units with ownership of the common parts through a commonhold association. The commonhold association controls the management of the shared parts in accordance with a ‘commonhold community statement’ (CCS) agreed between the freeholders, and is funded with the payment of a ‘commonhold assessment’ paid by each of the freeholders (which is similar in nature to a service charge payable under leasehold ownership).