Next UK Government must set key dates for implementation of Leasehold Act

Propertymark: The next UK Government must finally set the key dates for the implementation of Leasehold Act.

The Act received Royal Assent on 24 May 2024, bringing in an immediate ban on most new leasehold houses. Only a few minor amendments to the Building Safety Act will come into force on 24 July 2024, as well as allowing a property to be repossessed because of a missed rentcharge payment. The remainder of the Act will come into effect at the discretion of the next UK Government after the General Election.

The most recent estimate from the previous UK Government suggested implementation dates in 2025 / 2026, and that the provisions would be implemented in stages. Many of the reforms contained in the Act are complex and will require new regulations or secondary legislation to be created which set out the finer details.

Still some time before lease extension costs go down:

Whilst the intention of the legislation is to make leasehold extensions cheaper there is still work needed to make this a reality. The cost of lease extensions and freehold purchases is dictated by the capitalisation and deferment rates, which must be set at market value and are likely to need separate consultations and secondary legislation.

There is some concern that if these rates are set lower than what is currently agreed between valuers the cost of extensions could go up for those with leases over 80 years, but until that happens nothing is definite.

Ground rent cap missed the boat:

Despite campaigning from Propertymark and many other stakeholders, the Act has failed to capture a ground rent cap for existing leaseholders, even though the UK Government consulted extensively on it.

There were claims the popular proposal of setting ground rents to a peppercorn were met with fierce resistance from HM Treasury in early 2024, following a lobbying campaign from pensions funds which had invested billions in buying up freeholds for blocks of flats.

However, existing leaseholders can reduce their ground rent to a peppercorn (£0) either by extending their lease or exercising the new legal right to buy out the ground rent.

Stronger rights for consumers, eventually:

Once it is fully in effect, the Act will give leaseholders greater transparency over service charges and who manages their 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
Propertymark continues work for members:

Propertymark will continue to engage with politicians and UK Government officials as the next stages of the implementation are developed to ensure that new regulations and secondary legislation is fair, practical, and fit for purpose.

 

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