Leasehold Reform Expected in Next Session of Parliament

10/05/2023

A new Bill that will reform the leasehold system for properties in England and Wales is expected to be introduced imminently following a government announcement last week.

Levelling Up Minister Baroness Scott of Bybrook told the House of Lords on 2 May 2023 that the new Leasehold Bill will be introduced in the “next session of parliament”, which is due to start in autumn 2023, meaning that the reforms could be in place by the end of this year.

The Leasehold Bill is the second phase of a leasehold reform package that the government announced in 2021. 

The forthcoming Bill will deal with enfranchisement, which is the process of acquiring the freehold or extending the lease of a property. 

The Bill is expected to address several areas, including:

• Reforming the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
• Abolishing marriage value (the increase in the value of the property following the completion of the lease extension, reflecting the additional market value of the longer lease).
• Capping the treatment of ground rents at 0.1% of the freehold value and prescribing rates for the calculations at market value. 
• Giving leaseholders of flats and houses the same right to extend their lease agreements as often as they wish, at zero ground rent, for a term of 990 years.
• Enabling leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term.

An online calculator will also be introduced to make it easier for leaseholders to work out how much it will cost them to enfranchise.

The government hopes that the reforms will make the enfranchisement process simpler and cheaper. The new legislation has been described by Baroness Scott as “very complex” and is not expected to be available for pre-legislative scrutiny.

You can follow the progress of the Bill and find out more about the estimated timetable on the House of Commons website by clicking here.

The first part of the government’s leasehold reform was introduced in the Leasehold Reform (Ground Rent) Act, which came into force on 30 June 2022 and was intended to make homeownership fairer and more transparent for future leaseholders. 

The Act put an end to ground rents for most new long residential leasehold properties in England and Wales. Previously, some leaseholders had been contractually obligated to pay onerous and escalating ground rents with no clear service in return. The government believes that the Act will prevent this from happening in future by tackling significant ambiguity and unfairness.

There are indications that there might be more changes to come. The government has asked the Law Commission to recommend reforms to reinvigorate commonhold so that it may offer a workable alternative to leasehold for both existing and new homes. Commonhold was introduced in 2002 as a way of enabling the freehold ownership of flats and avoiding the shortcomings of leasehold ownership, but it has failed to take off. 

To read more about the Law Commission’s report, head to its website by clicking here.

Leasehold Solicitors Near Me 

Under the Leasehold Reform Act 1967, you have the right to request that the freeholder sells you the freehold of your leasehold house. However, several matters should be considered, including points raised in this article. Russell & Russell can help you with the process and guide you through this complex area of law.

If you have any questions about the upcoming reforms or are a leaseholder and want to know more about the enfranchisement process, please get in touch with Russell & Russell Solicitors. You can call us on 0800 103 2600 or make an online enquiry.

Please note that this article is meant as general guidance and not intended as legal or professional advice. Updates to the law may have changed since this article was published.