A Timeline of Leasehold Reform

Sinead Campbell from London Flats Insurance outlines the changes that have been made in the leasehold sector from 2017 to now, with a short and sweet explanation of each alteration to bring you up to date.

With endless discussion among decision makers and seemingly endless legal updates, we thought a timeline of events may be very useful to our readers.

2017 to 2019

In July of 2017, the government ran a consultation: “Tackling Unfair Practises in the Leasehold Market”. It concluded in December 2017, having scrutinised “a range of measures to tackle unfair and unreasonable abuses of leasehold; in particular the sale of new leasehold houses and onerous ground rents.” The full outcome can be read here.

The consultation promised:

Legislation to prohibit the development of new build houses
A reduction of ground rents down to a peppercorn for newly established leases of houses and flats
Support for existing leaseholders, such as making buying a freehold or extending a lease easier, faster, fairer, and cheaper.

Alongside the Unfair Practises consultation, in October 2017, the Government ran a call for evidence: “Protecting Consumers in the Letting and Managing Agent Market”, seeking views on whether a new regulatory model was needed for agents in the leasehold sector. The outcome of was released in April 2018.

Also running from February 2018 to January 2019, was the “Strengthening Consumer Redress in Housing” consultation. This resulted in Government commitments to:

Form a Housing Complaints Resolution Service,
Form a New Homes Ombudsman for buyers of new build homes
To bring forward legislation to close the gaps in redress services for consumers including to require all private landlords to sign up to a redress scheme
Form a Redress Reform Working Group with the housing redress sector to develop the proposals

In October 2018, the Government announced another consultation: “Implementing Reforms to the Leasehold System”. It concluded in June 2019, with the full outcome available here, which details the following commitments:

To legislate to ensure that all new houses will be sold on a freehold basis
To reduce ground rents on future leases to a peppercorn (zero financial value)
To give freeholders on private and mixed-use estates the right to challenge the reasonableness of estate rent charges and the right to apply to the First-tier Tribunal to appoint a new property manager
To mandate that freeholders and managing agents must provide leasehold information (when a home is being sold) within 15 days with a maximum fee of £200 plus VAT

Just as this consultation came to a close, another opened: “Redress for Purchasers of New Build Homes and the New Homes Ombudsman”. This ran until February 2020 and sought views on delivering a New Home Ombudsman for buyers of new build homes.

2020 to 2021

The Law Commission releases 3 reports in July of 2020:

“Reinvigorating Commonhold: The Alternative to Leasehold Ownership”, a summary of which is available here
“Leasehold Home Ownership: Buying Your Freehold or Extending Your Lease”, which you can read about here
“Leasehold Home Ownership: Exercising the Right to Manage” which you can delve into here

In response, in May 2021, the Government established an advisory Commonhold Council. The council was described in the press release as an “expert group to help homeowners gain more control over their homes”.

Chaired by Building Safety Minister, Lord Greenhalgh, the council brought together leasehold groups and industry representatives; asking them to share their expertise on consumer needs and market readiness for commonhold within the housing sector.

2022

Based on their “Reforming the Leasehold and Commonhold Systems in England and Wales” consultation, in 2022, we saw the first legislative changes for the sector: the Leasehold Reform (Ground Rent) Act 2022.

The act effectively abolished ground rents and reduced fees for lease extensions down to a peppercorn, coming into effect for most new leases on 30^th June 2022, and from 1^st April 2023 for leases of retirement homes.

The Government stated that “the Act will make home ownership fairer and more transparent for millions of future leaseholders…tackling significant ambiguity and unfairness.”

In April of 2022, the Building Safety Act was given Royal Assent. This act was largely brought about by the Grenfell Tower tragedy and the resulting investigations into unsafe cladding and necessary remedial works.

The Government described the Act as a group of “ground-breaking reforms to give residents and homeowners more rights, powers, and protections…It delivers far-reaching protections for qualifying leaseholders from the costs associated with remediating historical building safety defects, and an ambitious toolkit of measures that will allow those responsible for building safety defects to be held to account.”

2023 to 2024

In September 2023, the Financial Conduct Authority published their final rules which would come into effect from 31^st December 2023. The rules laid out two key changes:

Leaseholders would now be considered stakeholders alongside those who were named as the policyholders
Firms must now provide a disclosure document containing the information needed for leaseholders to be given true transparency and the chance to challenge the policy choice

In November 2023, the Government’s “Leasehold and Freehold Reform Bill” was introduced to Parliament. It’s an amendment to the existing Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993. It focusses on bolstering the rights of leaseholders when it comes to collective enfranchisement and lease extensions.

An overview of the proposed measures includes:

Increasing the standard lease extension term for houses and flats to 990-years with ground rent reduced to a peppercorn (zero financial value)
Removing the ‘marriage value’ associated with extending a lease that’s close to expiry
Removing the requirement for a new leaseholder to have owned their house or flat for 2 years before they can benefit from these changes
Increasing the 25% ‘non-residential’ limit that prevents leaseholders in buildings with a mixture of homes and other uses from buying their freehold or taking over management of their buildings to 50% non-residential floorspace
Setting a maximum time and fee for the provision of information required to make a sale
Requiring transparency over leaseholders’ service charges including a standardised, comparable format
Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees
Requiring freeholders who manage their property to belong to a redress scheme so leaseholders can challenge them if needed and scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.
Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders
Protectingleaseholders by extending the measures in the Building Safety Act 2022 to ensure it operates as intended
Banning the sale of new leasehold houses other than in exceptional circumstances

The bill has moved through the House of Commons and is currently moving through the House of Lords, having had its first reading on the 28^th February 2024.

In December of 2023, the Government also launched a consultation called “Modern Leasehold: Restricting Ground Rent for Existing Leases” which closed in January 2024, but has not been summarised as yet.

We eagerly await the conclusion of the consultation, as well as seeing what form the Leasehold and Freehold Reform Bill may take as it evolves into an Act.

For more information, please contact a member of the London Flats Insurance team on 020 7993 3034.