KING’S SPEECH CONFIRMS ‘REFORM’ TO LEASEHOLD SYSTEM
In his first King’s Speech, King Charles confirmed that the government intends to bring forward reforms to the leasehold system in the year ahead.
The King said: “My ministers will bring forward a bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold and tackle the exploitation of millions of homeowners through punitive service charges.”
These reforms will build on Leasehold Reform (Ground Rents) Act 2022, and are intended to improve home ownership for millions of leaseholders in England and Wales.
What do the reforms mean for leaseholders?
1) Improved transparency over leaseholders’ service charges. This means managing agents and freeholders will be required to provide their leaseholders with a breakdown of costs in a standardised comparable format.
2) Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold.
3) Standard lease extension term increased from 90 years to 990 years, with ground rent reduced to £0. Giving leaseholders the security and ground rent free ownership of their properties, without the hassle and expense of future lease extensions.
4) Removing the requirement for leaseholders to have owned their property for two years before they can benefit from the changes.
5) Increasing the 25% ‘non-residential’ limit to 50%. The current 25% limit prevents many leaseholders in buildings with a mixture of homes and other uses – e.g. shops and offices – from buying their freehold or taking over management of their buildings.
6) Scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.
What do the reforms mean for landlords and managing agents?
1) Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders.
2) Maximum time and fees to be introduced for the provision of information required to make a sale (such as building insurance or financial records) to a leaseholder by their freeholder. This will make buying and selling leasehold property quicker and easier.
3) Freeholders will be required to belong to a redress scheme.
4) Transparency of administration fees to the leaseholder when renewing buildings insurance.
5) Building on the legislation brought forward by the Building Safety Act 2022, ensuring freeholders and developers are unable to escape their liabilities to fund building remediation work.
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