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What To Expect On Government Leasehold Reform

(Alamy)

5 min read

A Leasehold Bill is widely expected to be included in the King’s Speech on Tuesday, and campaigners are pushing the Government to reform the system.

A leaseholder is a tenant who has paid to live in a property for a select period of time, and often includes apparent homeowners. Government data suggests long-term leaseholds usually last between 99-125 years.

Once the agreement ends, the property returns to the landlord, who owns the home and the plot of land. Government data suggests there are almost five million leasehold properties in England, which makes up 20 per cent of the current housing stock. 

Many tenants who have purchased leasehold properties face expensive service charges to maintain their homes and apartment blocks, and in some cases have had to hand over thousands of pounds to extend their lease. 

A new Leasehold Bill is expected to prevent housebuilders from selling new terraced, semi-detached and detached homes as leasehold. The upcoming Bill could also look at abolishing the Marriage Value, which is an added charge tenants have to pay when they have less than 80 years remaining on their lease. 

Michael Gove, the Levelling-up Secretary, is expected to ban commissions on buildings insurance from freeholders and managing agents. In January 2023 he wrote to Clive Betts, the chair of the Levelling-up Committee, and said he would replace these fees with more "transparent" costs. 

The Financial Conduct Authority, the City Watchdog, found that freeholders and managing agents have collected £80 million from flat leaseholders from buildings insurance over the last few years. 

PoliticsHome also understands a Leasehold Reform Bill could introduce an online calculator. This could be used by leaseholders who want to know what an accurate price should be if they decided to extend their lease or buy the freehold outright. Campaigners have claimed this would reduce potential legal disputes between freeholders and leaseholders on how much their property costs. 

Activists supporting leasehold reform have also called for the Government to cap ground rents to 0.1 per cent of the home’s value, which would prevent costs from spiralling and becoming unmanageable.

The cost of a tenant’s ground rent is determined on the contract between the leaseholder and freeholder. It can remain the same for a certain period of time before being reviewed every few years or rising in line with a home’s value.

However, the Guardian reported that new flats, which make up the majority of the market, will still be able to be sold as leasehold.

PoliticsHome understands there could be pressure from Conservative, Labour and Liberal Democrat MPs to extend this ban to all new flats. 

Meanwhile, research from Commonhold Now, a campaign group to end leasehold, has found that fewer than 10 Tory MPs have publicly opposed leasehold reform in the past or are sympathetic to the current system.

One Conservative MP who has campaigned for leasehold reform said they thought the number of backbench rebels could be even smaller than 10. 

Harry Scoffin, co-founder of Commonhold Now, said he believed the Government had the political space to set out bold reforms on Leasehold.

He said he believed his government would face less opposition on reforming leasehold to reforming the rental sector and scrapping no-fault evictions.

“Indeed, Commonhold, a form of freehold ownership of flats that finds equivalents in North American condominium, co-operative and co-ownership on the continent, and strata title across Australia, New Zealand and Asia, was coined by the late Tory MP, Sir Brandon Rhys-Williams, and supported by Margaret Thatcher and John Major,” he said.

“England and Wales are exceptional in the world for persisting with this essentially feudal tenure of leasehold.

“There is nothing more Conservative than expanding the property-owning democracy and spreading land capital to aspirational people.

“With an election fast approaching, the Conservative government needs to show voters it has done something meaningful to address the housing crisis."

Research from Opinium, commissioned by Commonhold Now, found 60 per cent of Conservative 2019 voters supported overhauling the current system. In addition, it also found a majority of Tory voters who live in the Blue Wall were in favour of replacing leasehold with commonhold. 

Nickie Aiken, Conservative MP for Cities of London and Westminster, who has campaigned to reform leasehold, told PoliticsHome she believed it was time for the Government to reform the system. 

Aiken said leasehold reform should be taken “step by step” and that she had seen too many examples in central London where leaseholders were treated poorly by their freeholders. 

“It's now time that leasehold reform was carried out, so that people who want to can take over the management of their buildings with their neighbours," she said. 

"So that they are confident that their properties are being well maintained. As a Conservative, this is an example of a pure Conservative policy, allowing people the ability to own their own homes outright.” 

Aiken compared Leasehold reform to an extension of Right to Buy, which was introduced in the 1980s by Margaret Thatcher and allowed tenants to buy their council houses at a discounted rate. 

Bob Blackman, Conservative MP for Harrow East, who has also campaigned for leasehold reform, told PoliticsHome leasehold reform had been promised for a very long time. 

He said it will be a complex issue for the Government to deal with and will take a large proportion of Government time. 

“The department have had quite a lot of complex matters to deal with", he said.

Greg Smith, Conservative MP for Buckingham, told PoliticsHome he believed the Government must radically reform the leasehold system. 

“We can’t turn the leasehold system off overnight but we have to phase out leasehold over time and turn those properties into freehold,” he said.  

“There is no other option. We will be in a perpetual cycle and it’s not a sustainable position.” 

A DLUHC spokesperson said the current Government has "already" made improvements to the leasehold system. 

“We have already made significant improvements to leasehold – ending ground rents for most new residential leases, and will make it easier and cheaper for leaseholders to extend their lease or buy their freehold," they said.

“The Secretary of State has been clear that we will bring forward legislation to protect leaseholders as soon as is possible."

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