The Concerns of Rushed Legislation

Rushed legislation often brings unforeseen complications, especially with complex bills like this. The expedited process curtailed the usual scrutiny, raising concerns within the sector. Specifically, the long-term consequences of changes to freehold valuations and cost liabilities may not favour leaseholders. Additionally, the Act does not differentiate between various types of leaseholders and landlords, potentially benefiting large buy-to-let investors over resident leaseholders who have purchased their freehold.

New Leasehold Landscape: What We Know

Although the final text of the Act is pending publication, several key reforms are anticipated:

1. Ban on New Leaseholds for Houses: The Act prohibits new leasehold agreements for houses, with significant penalties for breaches. However, shared ownership houses are exempt.
2. Extended Lease Terms: Lease extensions for both flats and houses will now be granted for 990 years.
3. Cost-Effective Lease Extensions and Enfranchisements:
   1. 1. Marriage value will no longer apply to leases under 80 years.
      2. New valuation methods, including fixed deferment and capitalisation rates, will be introduced.
      3. Leaseholders will be liable only for their own costs, not the landlord’s.
      4. Changes in leaseback provisions may reduce premiums for freehold acquisitions.
      5. Modern ground rent adjustments for house leases are now aligned with flats, reduced to a peppercorn rent.
4. Easier Lease Extensions and Claims: The Act removes the two-year ownership requirement for lease extensions and freehold acquisitions and increases the qualifying building criteria for collective enfranchisement and right to manage claims.
5. Shared Ownership Clarity: The Act clarifies shared ownership leaseholders’ rights, providing clear guidelines on lease extensions and enfranchisement claims.
6. New Rights for Leaseholders: Certain leaseholders can reduce their rent to a peppercorn without extending the lease simultaneously, requiring a lower premium.
7. Changes in Charge Recovery:
   • • Enhanced transparency in service charge obligations and new landlord obligations.
     • Mandatory publication of administration charges by landlords.
     • Reformed insurance cost recovery and estate charge systems for freehold houses.

Omissions from the Act

Several anticipated reforms did not make it into the final Act:

• Leasehold abolition, except for new houses.
• Ground rent abolition or capping for existing properties.
• Amendments proposed by the House of Lords, including estate agent regulation and differentiation between leaseholder categories.
• Reformed Commonhold laws.

Uncertainties and Future Developments

Despite the outlined changes, several aspects remain unclear:

• Commencement Dates: Most provisions await a commencement date from the Secretary of State.
• Secondary Legislation: Detailed secondary legislation is needed to clarify the Act’s effects.
• Potential Challenges: Landlords might challenge the Act, particularly regarding human rights and financial impacts.
• Long-Term Consequences: The Act’s implications for landlords, leaseholders, pension funds, and housing providers are still under debate.

Planning for the Future

Leaseholders considering extending their lease, selling property, or facing a lease near 80 years should seek specialist legal and valuation advice. Burtons Solicitors can help you navigate your options and connect you with expert valuers.

For landlords, reviewing portfolios in light of the new valuation rules is crucial. Burtons Solicitors can assist you in understanding and adapting to these changes, ensuring economic and viable management of lease extensions and enfranchisement claims.

For comprehensive advice and support on the Leasehold and Freehold Reform Bill 2023, get in touch today using our online contact form here.