Campaign continues as ground rent cap not included in leasehold reform

Campaign continues as ground rent cap not included in the Government’s Leasehold and Freehold Reform Bill.

The Leasehold and Freehold Reform Bill received Royal Assent and became law on Friday 24 May 2024. It was included as part of the ‘wash-up’, as the House of Lords dealt with Bills prioritised with cross-party agreement, following the announcement of the General Election on Wednesday 22 May 2024.

The legislation is far from perfect, but it is the start of reform to outdated legislation which was not fit for purpose. There will be a ban on the sale of new leasehold houses and every new home in England and Wales will be freehold from the outset.

The Act will also remove the requirement for a new leaseholder to own their property for two years before a lease can be extended or the freehold purchased.

The new laws will make it more commonplace to extend a lease and information about leasehold property will be made more transparent, to make buying, selling, and renting leasehold property easier.

Extensive campaign for reform:

Propertymark has long campaigned for change and directly influenced the introduction of the Leasehold Reform (Ground Rent) Act in June 2022, which ended ground rent for most new long residential leases.

In Propertymark’s briefing to the House of Lords in March 2024, they outlined what should have been included in the Leasehold and Freehold Reform Bill to fully reform and give more rights and protections to homeowners, to ensure the legislation is workable and evidence-based. Whilst it is pleasing to see some of their key recommendations have been listened to, Propertymark have vowed that they will continue to seek further amendments. View Propertymark’s briefing on leasehold reform.

Ground rent cap:

Since the introduction of the Bill in November 2023, Propertymark has raised concerns of member agents about the absence of elements promised, including a ban on new leasehold houses and restriction on ground rent.

Despite campaigning from Propertymark and many other stakeholders, the Act has failed to capture no ground rent cap for existing leaseholders, even though the UK Government consulted extensively on it. It was also widely believed that this would be, at some point, put into the Bill.

Regulation of property agents:

In March 2024, Matthew Pennycook MP put forward an amendment which would lead to implementing the Regulation of Property Agents working group report within 24 months of the Leasehold and Freehold Reform Bill becoming law.

It is disappointing that it was rejected, with representatives from DHLUC stating that it was a significant area which needed further consideration.

At a time when building safety regulations have increased and become more complex, it is shortsighted that policymakers were unwilling to see the benefit to consumers of qualifying and licensing the competency of those who work in the property sector.

Consumer rights strengthened:

The new legislation provides further protections to homeowners, making it cheaper and easier for people to extend their lease or buy their freehold to have more security and pay less.

The standard lease extension term has increased to 990 years for houses and flats, previously it was 50 years for houses and 90 years for flats.

Leaseholders will have greater transparency over service charges and who manages the building, as well as other benefits:

      • Freeholders or managing agents must issue bills in a standardised format to make them easier to scrutinise and challenge
      • It will be easier and cheaper to take over the management of buildings to allow leaseholders to appoint the managing agent of their choice
      • Leaseholders will no longer have to pay their freeholder’s costs when making a claim
      • Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice
      • Replacing opaque and excessive building insurance commissions for freeholders and managing agents, with transparent and fair handling fees
Redress:

The Act will enforce freeholders, who manage their buildings directly, to belong to a redress scheme so leaseholders can challenge them if required, this brings them in line with managing agents who are already required to belong to a scheme.

It will also grant homeowners on private and mixed tenure estates the rights of redress, so they can receive more information about the charges and challenge them.

 

Propertymark supporting agents:

Propertymark will consider the greater ramifications for consumers, estate agents, plus other stakeholders and produce detailed fact sheets and FAQs, to support Propertymark member agents in fully understanding the Leasehold and Freehold Reform Act variants and nuances to ensure material information will inform a buyer’s decision.

 

Kindly shared by Propertymark