Leasehold and Freehold Reform Bill 2023
News:
The King’s speech on 7th November 2023 included the announcement of a forthcoming ‘Leasehold and Freehold Reform Bill’ with the aim of reforming the housing market and making it cheaper and easier for leaseholders to purchase their freehold and to protect the leaseholders from punitive service charge payments.
The bill will need to go through Parliament before it becomes law (average time one year). There are no guarantees on any of this.
The key points are as follows:
- Marriage value to be removed from premium calculations. This will significantly reduce premiums payable where the existing lease is under 80 years.
- Ground rents above 0.1% of freehold value to be ignored from premium calculations. This will significantly reduce premiums payable where the current ground rent is onerous.
- Extended leases to be 990 years instead of 90 years. This is of benefit to the leaseholder and will make little difference to the premium payable.
- The 2 year ownership requirement for lease extensions to be removed. No longer will leaseholders to have owned a property for 2 years prior to a lease extension claim. Therefore, it will be easier and cheaper to sell a property with a short lease as there will be no need to serve and assign notices prior to a sale.
- A right for leaseholders with long leases with unexpired terms of over 150 years to buy out ground rent. This means leaseholders with long leases will no longer have to undertake a statutory lease extension to remove a ground rent.
- The maximum non residential element of a building in an enfranchisement claim to be increased to 50% from 25%. More mixed use properties will be capable of enfranchisement by the leaseholders.
- Leaseholders enfranchising will be able to require freeholders to take a leaseback of any non-participating flats. Potentially this could make it both easier and cheaper for leaseholders to enfranchise when not all leaseholders are participating in the action.
- Landlords (freeholders and head leaseholders) will have to bear their own costs in enfranchisement matters. Significant savings for leaseholders as currently leaseholders have to pay Landlords legal and valuation costs.
- Removal of the provision requiring leaseholders to wait 12 months to make a lease extension claim when a section 42 notice is withdrawn and removal of restrictions on leaseholders making repeat enfranchisement claims. This will be of benefit to leaseholders as the current regulations require delays which can increase valuations and prevent lease extensions and enfranchisement proceeding.
- Houses where valuation is currently under Section 9.1, tenants can choose between the new 2024 valuation method or elect to still value under the old section
Information kindly provided by
Julian Wilkins & Co. Chartered Surveyors