Leasehold and Freehold Reform Bill read in Parliament
The long-awaited Leasehold and Freehold Reform Bill had its First Reading in Parliament on Monday 27 November 2023.
Called for by the industry for some time, the First Reading follows the King’s Speech in which King Charles confirmed the government’s intention to bring forward the reforms.
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.”
Welcomed news for the world of Service Charge, the Second Reading is scheduled to take place in the House of Commons on 11 December 2023, cited by the Parliamentary Bills website. The Second Reading will be the first opportunity for MPs to debate the general principles and themes of the Bill.
Levelling Up Secretary, Michael Gove, stated that he is confident that this Bill will be passed before the next General Election.
WHAT DO THE REFORMS MEAN FOR LEASEHOLDERS?
- 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.
- Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold.
- 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.
- Removing the requirement for leaseholders to have owned their property for two years before they can benefit from the changes.
- 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.
- 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?
- Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders.
- 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.
- Freeholders will be required to belong to a redress scheme.
- Transparency of administration fees to the leaseholder when renewing buildings insurance.
- 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.
TC GROUP SERVICE CHARGE
With one of the UK’s largest team of accountants dedicated to service charge, we handle over 3,500 developments nationwide with a client property portfolio ranging from single schedule blocks of flats through to large complex mixed-use developments.
For more information on how we can support you on your journey to transparency, and to keep up to date with how this could affect you and your service charge accounts, find out more about our Service Charge Accounts.