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What To Expect In The New Leasehold and Freehold Reform Bill

(Alamy)

7 min read

A Leasehold and Freehold Reform Bill will be brought forward in Parliament on Monday afternoon, as campaigners and MPs gear up to widen the Bill’s scope and make it more radical.

The legislation will attempt to deliver on the Government’s manifesto pledge to reform the leasehold and housing market. It has claimed the new reforms, which among many things will look at making it easier for tenants to extend their lease and take over the management of their buildings, will empower existing leaseholders.

Reforms to leasehold have long been promised by prime ministers including Margaret Thatcher, John Major, Tony Blair, Theresa May and Boris Johnson but successive governments have failed to deliver on their promises to overhaul the current system. 

In this government, Michael Gove, Secretary of State for Levelling-up, has promised for months to change the "feudal" leasehold system. In addition, the Conservatives in their 2019 manifesto promised to reform leasehold. 

Here is what you need to know about the Leasehold and Freehold Reform Bill.

What is a leaseholder?

A leaseholder is a tenant who has paid to live in a property for a select period of time, and often includes apparent homeowners. Once the agreement ends, the property returns to the landlord, who owns the home and the plot of land. 

Government data suggests long-term leaseholds usually last between 99-125 years. It is understood there are more than 5.3million leaseholders in England and Wales, making up to 20 per cent of the current housing stock.

PoliticsHome understands a Leasehold Bill will be published after any urgent or ministerial statements on Monday.

What will be in the Bill?

Gove has outlined that he will make it cheaper and easier for people to extend their lease or buy their freehold outright.

The proposed legislation suggests that the Government will "increase standard lease extension terms" to 990 years on houses or flats. The Bill will also make it easier for tenants to take over the management of their building.

Government proposals will require freeholders – who lease their properties to leaseholders – to manage their building directly. Gove also aims to make it easier for leaseholders to complain and challenge their freeholder by forcing landlords to sign up to a redress scheme. 

Ahead of the Bill, Gove said leaseholders have for too long been denied the full benefits of home ownership. 

“That’s why liberating leaseholders forms a vital part of the Government’s Long-Term Plan for Housing,” he said.

“So today marks a landmark moment for millions of leaseholders across the country, as we unveil laws to deliver significant new rights and protections, slash unfair costs and crack down on exploitation.”

Lauren Thomas, Research Manager at Priced Out, told PoliticsHome the group would welcome any attempt to bring England and Wales's property system in line with the rest of the world, but warned that any intervention in the housing market must not reduce the supply of homes. 

"We welcome an attempt to bring land tenure in line with the rest of the world by embracing commonhold,” she said.

“However, any intervention to end the arcane system of leasehold must be done consistently with property rights and without decreasing the supply of houses.

"We look forward to engaging with the government to ensure their reforms don’t risk worsening the housing crisis."


Why is Leasehold Reform a contentious issue?

Leasehold Reform has been promised by successive Governments for almost four decades.

Many tenants who have purchased a lease on their properties face expensive charges to maintain their homes and apartment blocks, and in some cases have had to spend thousands of pounds to extend their lease.

 Thatcher was the first prime minister to try and reform the market in 1987, when she gave leaseholders the right of first refusal when their freeholders wanted to sell their property.

In 1993 Major gave leaseholders the freedom to extend their leases and buy the freehold.

Under Blair, New Labour introduced the Right to Manage, which applied to buildings with fewer than 25 per cent non-residential space.

Nickie Aiken, Conservative MP for Cities of London and Westminster, told PoliticsHome she was keen for the government to push ahead with leasehold reform, and finish “what Margaret Thatcher started”.

She claimed she had full confidence in the current government to bring forward meaningful reforms. Aiken added she believed many in the Levelling-up department understood the contentious issues around leasehold. 

“For me, Lee Rowley, the Housing Minister, who is a former Westminster City Councillor, understands the nuances of leasehold reform,” she said

“If we say to him, we need to tweak the Bill, I will be talking to someone who understands my constituency and leasehold reform," she added.

Many within the housing sector have pushed back on Leasehold reform and claimed it is beneficial to the housing system.

A spokesperson from the Residential Freehold Association previously told PoliticsHome the current leasehold system works for the “vast majority of the UK’s 4.9 million leaseholders” and the Government should reconsider its position.

“There is no evidence that the public at large want leasehold to be abolished, and polling has shown that a large majority of those surveyed do not want the obligations that come with the proposed changes,” they added.

Despite pushback from some industry sources, there are not many people within the Conservative parliamentary party who oppose leasehold reform outright.

Research from Commonhold Now, a former 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.

What are the criticisms of the proposed Bill?

Many critics of the current proposals have claimed there is not enough radical action to reform service charges. In addition, some have claimed that there has been a failure to ban new flats from being sold as leasehold. 

The Right to Manage, which was brought in by Blair in 2002, enabled leaseholders to remove the managing agent and gain control of services charges if 50 per cent or more of tenants within a block of flats or an estate voted for it. 

Government has so far not committed to liberalising the 50 per cent figure to make it easier for leaseholders to take control of the service charges. 

Campaigners and housing activists have claimed the figure is too high and has made it impossible for leaseholders to take back control. 

Harry Scoffin, founder of campaign group Free Leaseholders, which was launched last week to ‘rescue’ the Leasehold and Freehold Reform Bill, told PoliticsHome while there are useful changes in the new legislation, the proposals “fail completely to give people control of their managing agents or their service charge budgets”.

“Every other country in the world manages some kind of Commonhold system successfully, including Scotland. Gradual reform has been tried over and over for 150 years. We know it never works,” he added.

“With 5.3 million households now caught in the leasehold trap, failure to abolish the tenure in England and Wales must be called out for the legislative failure and moral cowardice it most certainly is.” 

Another issue which has been raised by MPs is a future ban on selling new flats as leasehold. PoliticsHome previously reported there could be pressure within the coming months from Conservative, Labour and Liberal Democrat MPs to implement this policy. 

Bob Blackman, Conservative MP for Harrow East, told PoliticsHome he believed there is more to do in terms of leasehold reform, particularly on flats. 

"The reform is to be welcomed. It delivers the long promised abolition of the sale of leasehold houses. The problem, I think, is that there's a lot of complications around the position on flats," he said. 

"The other issue that we have to watch out for is what is within the scope of the bill that can be amended.

"One of the problems here is that if the Bill is cast wide enough, clearly, it will be possible to propose amendments. But if a Bill is narrow in its scope, there may not be."  

What has the Labour Party suggested?

The Labour Party has claimed it will end the “feudal” leasehold system. Lisa Nandy, the former Shadow Levelling-up Secretary, said the party would abolish leasehold within the first 100 days of office.

It was reported in the Guardian that a future Labour Government would include a Leasehold Reform Bill within their first King’s Speech if the Conservatives failed to act.

Labour has pledged to adopt the proposals from the Law Commission which would make it easier for leaseholders to buy or extend their lease. This is similar to the reforms which were proposed in the Leasehold Reform Bill today.

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Read the most recent article written by Tom Scotson - Government Is Steadfast On Reforming Leasehold Despite Resistance