Although large parts of the Renters’ Reform Bill – which is aimed at putting an end to so-called ‘no-fault’ evictions – have effectively been put on hold until changes have been made to the court system, the King’s Speech still contained some important announcements for property owners and tenants.
Maunder Taylor, independent estate agents based in Whetstone, look at the key points of the Leasehold and Freehold Reform Bill, which was included in the Government’s legislative programme for the year ahead.
The Key Points of the Bill
New Properties – under the provisions of the Bill, all new homes must be sold on freehold basis rather than leasehold. Very few houses are sold as leasehold now anyway, so there is likely to be very little impact on the property market – and the leasehold ban does not apply to new flats and apartments. This absence has been met with strong criticism from tenants’ and housing campaign groups.
Abolition of the Two-Year Ownership Condition – Currently leaseholders have to wait two years before they can either extend their lease or buy the freehold of their property. This is likely to be uncontroversial, as you can already start a lease extension and “assign” it to a buyer. It just makes the legal process easier for conveyancers.
Lease Extensions – currently the legislation, in the form of The Leasehold Reform, Housing and Urban Development Act of 1993, means that leases can only be extended by 90 years. However, the Bill will allow leases to be extended by 990 years at a similar cost to the leaseholder. This is likely to be included in the legislation as it should prove fairly uncontroversial – it will reduce the amount of administrative work involved for all parties and it has already been trailed by the Government several times.
Ground Rents – The Government has also talked of the need for leaseholders to enjoy “secure, ground rent-free ownership of their properties for years to come, without experiencing any of the difficulties and expense of future lease extensions.
So ground rents could be either reduced in value or abolished altogether. They could be capped at a percentage of the total freehold value – essentially reducing them to a “peppercorn” or nominal value. It has now put this issue out to a six-week public consultation.
Other Proposals – there are a number of other smaller elements to the Bill which are aimed at improving leaseholder’s rights. These include increasing the transparency over the service charges they are required to pay and scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.
It had been widely thought that the Marriage Value (the increase in the value of a lease once it has been extended) would be abolished under the Bill, but the only reference to it in the King’s Speech was the phrase about making lease extensions cheaper for first-time buyers.
The Government has to call a General Election at some point over the next 14 months (the latest date is 28th January 2025). It is unclear if the Bill will become law before then as it needs to be debated and approved by both the House of Lords and the House of Commons. Any elements of the Bill which need to go out to public consultation (such as the ground rents issue) could easily run out of time.
Maunder Taylor – Independent Estate Agents in Whetstone
Maunder Taylor keeps up to date with any changes in the property market – so, whatever changes the Bill brings, we will still offer impartial lease renewals advice for any commercial or residential properties in Hertfordshire and across London.
If you would like to know more about any of our services, follow this link and fill in the online form or call either 020 8446 0011 (our Whetstone office) or 01707 665 666 (our Potters Bar office which deals with residential block management queries only).