New Freehold & Leasehold Bill Announced

On 7^th November 2023, the government, via the Kings speech, announced a new Bill which hopes to bring reform to the leasehold housing market.

The Bill is part of the Governments ongoing commitment to making long term and necessary changes to improve home ownership for millions of leaseholders and is reform that leasehold campaigners have been pushing for a number of years.

We have noticed when acting for leaseholders, particularly in the last few years, that there can be huge cost and work for the client involved. Often the service charge and ground rent is high, the lease terms are short and the process for buying the freehold is costly, difficult and time consuming. Most mortgage lenders have strict requirements when lending on leasehold properties and they often won’t where the ground rent is close to or above £250.00 or the lease term is short (80 years or less). This has meant that it is often difficult to sell a leasehold property without varying the unfavourable lease terms which can be very costly, with many freeholders wanting their legal costs to be covered by the leaseholder too.

The key proposals for this Bill are:

• Making it cheaper and easier for existing leaseholders to extend their lease or buy their freehold.
• Increasing the standard lease extension term for new leases from 90 years to 990 years for both houses and flats and reducing ground rent to a peppercorn (minimal amount). This will also mean that Mortgage Lenders will be satisfied as they tend to only lend on leasehold properties with a long lease and low ground rent. The government also indicated and is currently consulting on a cap to ground rents on existing leases to a peppercorn with such a cap being introduced through this Bill.
• Remove the need for a leaseholder to have owned their house or flat for two years before they can exercise their right to extend their lease.
• Banning the creation of new leasehold houses so that – other than in exceptional circumstances – every new house in England and Wales will be freehold.
• Making buying or selling a leasehold property quicker and easier, ensuring there is more transparency over leaseholder service charges.
• Replacing buildings insurance commission with clearer administration fees.
• Scraping the presumption for leaseholders to pay freeholders legal costs.

Reform of the leasehold system has long been called for and whilst the proposals are being welcomed and look to address many of the inequalities in the current leasehold system, there are some that feel the Bill does not go far enough. It is not presently known what and when the eventual law will look like, but the announcement of the Bill we feel is a start and a step in the right direction.

If you are looking to buy or sell your property, contact Emma Taylor on 01935 846205 or email emma.taylor@battens.co.uk