After years of speculation, promises, activity and then silence, the highly controversial Leasehold and Freehold Reform Bill was introduced to the House of Commons on 27 November 2023 which was promised to change the future of leasehold ownership forever. One year has now passed but has this promise been achieved?

What is Leasehold Enfranchisement?

Probably the best place to start as it isn’t the most commonly used term in everyday society.

Leasehold Enfranchisement is the overarching term for leaseholders collectively purchasing their freehold (Collective Enfranchisement) and leaseholders extending their residential leases (Lease Extensions).

What is the current position?

The Leasehold Reform, Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002) gave leaseholders the right to extend their leases by 90 years and reduce their ground rent to a peppercorn (i.e. nil) and also for leaseholders to purchase their freehold provided that at least 50% of the leaseholders participated (subject to various conditions and if the block was only two flats it had to be both).

Why is the law change? Has it changed?

In September 2018, the Law Commission decided to do a consultation into the area of Leasehold Enfranchisement and on 21 July 2020 they published the results of that consultation with recommendations as to how the sector could change to improve the position of home owners – essentially make it easier and cheaper for leaseholders to buy their freehold and extend their leases.

In January 2021, the government then announced its intention to bring forward these reforms but, except for minor changes, nothing materialised until 27 November 2023 when it suddenly published the Leasehold and Freehold Reform Bill and so the bill started to go through the various stages to become law. It stalled a little as a number of changes (and the more controversial points) were debated, until the sudden announcement calling the General Election on 4 July. This left two days for the Bill to enter the statute books and so on 24 May 2024 it was the last Bill to pass and make it into law until after the election. It received Royal Assent and so it has become law. However, there is a snag as it nearly all relies on secondary legislation being passed so in reality we are still operating under the old law!

What will change?

The act is very long and covers a great number of issues but concentrating on Leasehold Enfranchisement, the main ones are:

• Lease extensions to 990 years, not an additional 90 years;
• Standard Valuation Method with rates to determine the price to be set by legislation (these are yet to be announced and so it is assumed that this will not disadvantage leaseholders, but this can’t be confirmed);
• Marriage Value to be Abolished (this will make it far cheaper for any leases under 80 years);
• Freeholders to pay their own legal and valuation fees (this would make things far cheaper for leaseholders but is said to be subject to a minimum premium which is still yet to be decided);
• Ground Rents can be abolished without the need to extend the lease to make it cheaper and easier for leaseholders;
• Ground rent calculation to be capped if there is a high ground rent in the lease;
• No need to wait for 2 years of ownership to serve a notice to extend a lease;
• No more leasehold houses.

What does the future hold?

As you would expect, some of the above is highly controversial and if and when they come into force the freeholders will challenge their legality on a human rights basis.

For now, there has been no indication of time scales for implementation with the co-chair of the Leasehold Advisory Service believing that they are years, rather than months, away.

On 21 November 2024 the government issued the following statement:
“We appreciate fully the need to act urgently to provide [leaseholders] with relief. However, we are also cognisant of the significant complexity of the task and the importance of taking the necessary time to ensure that reforms are watertight”

Meanwhile, the government announced it will publish a bill next year focusing more on commonhold which perhaps muddies the waters even more.

My lease is low – should I act now or wait?

This is the question that we get asked every day, and it is very much a case by case basis, which relies on you understanding the potential benefits of proceeding now or waiting, and then taking a risk either way. Please contact our property team if you want to discuss the issue, and we will be able to talk through the pros and cons of your particular situation to try to help you come to an informed decision. Email property@tvedwards.com or call 0203 440 8000.