With the recent updates to the Financial Conduct Authority regulations, as well as the Government’s Leasehold and Freehold Reform Bill, leaseholders in England and Wales may be feeling a little lost about what they can now do to influence the decisions made in the running of their block.
Following the Leasehold Reform (Ground Rent) Act in 2022, leasehold reform has been in and out of the headlines. With these latest updates, leaseholders may be aware of the positive changes now in the works, but with so many changes coming at once, things can get confusing!
Here we’ll be providing some guidance; explaining the newfound responsibilities and decision-making power granted by comprehensive leasehold reform to today’s leaseholders.
What Has Happened So Far?
Recent updates from the Government and the FCA stem from a multitude of consultancies undertaken by the Government since their 2017 commitment to reviewing the system. Since then, seven consultancies have taken place covering:
- Tackling unfair practices in the leasehold market (2017)
- Protecting consumers in the letting and managing agent market (2018)
- Implementing reforms to the leasehold system in England (2019)
- Strengthening consumer redress in housing (2019)
- Redress for purchasers of new build homes and the New Homes Ombudsman (2020)
- Reforming the leasehold and commonhold systems in England and Wales (2022)
- Modern leasehold: restricting ground rent for existing leases (2023)
The upshot has been the release of major updates to the rules and regulations of the leasehold system. First, the Leasehold Reform (Ground Rent) Act 2022 (which effectively abolished ground rents and reduced fees for lease extensions down to a peppercorn) and now the Leasehold and Freehold Reform Bill, which has closely followed the Financial Conduct Authority’s regulation update, released in September 2023.
The reform bill, introduced to parliament on the 27th November 2023, is an amendment to the existing Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993. It focusses on bolstering the rights of leaseholders when it comes to collective enfranchisement and lease extensions:
“The Leasehold and Freehold Reform Bill, introduced to Parliament today, will make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges.
The Bill will also rebalance the legal costs regime and remove barriers for leaseholders to challenge their landlords’ unreasonable charges at Tribunal.
The new powers will also help more leaseholders take over the management of their property if they wish to, instead of being stuck with the freeholder’s management choice, and we will make this process cheaper for leaseholders.”
The Leasehold Advisory Service
What Changes Are Being Made?
Full guidance on the changes can be found on the Government website, but the headlines are here:
Lease Extensions:
- The bill makes it easier and cheaper for leaseholders to extend their leases, with ground rent brought down to a peppercorn and marriage value abolished.
- You no longer need to have own your property for 2 years to be able to extend your lease under the new rules.
- The standard lease extension term has been increased to 990 years.
Taking over the management of buildings:
- The bill makes it easier and cheaper for leaseholders to buy the freehold of their property, to appoint a managing agent of their choice, or to exercise their enfranchisement rights (as they will no longer need to pay the freeholder’s costs)
Transparency and Redress:
- The bill will ensure that service charge statements are clearer and provided in a standardised format so they can be compared and challenged more easily.
- Freeholders must belong to a redress scheme so that leaseholders can challenge their decisions in the same way they can for managing agents.
- The presumption that leaseholders should pay the legal costs of their freeholders when taking an issue to tribunal is abolished.
- Insurance commissions have been replaced with transparent admin fees.
Buying and Selling:
- The bill sets out a maximum length of time for freeholders to supply leaseholders with the information they need to put their unit up for sale.
- Newbuild houses will no longer be allowed to be sold on a leasehold basis unless in exceptional circumstances.
So, What New Powers Do You Have as a Leaseholder in England and Wales?
As you can see, the bill ultimately puts leaseholders back at the forefront, with your needs being highlighted at every juncture. You’ll now be able to challenge freeholder decisions through legal channels without the financial distress of covering their costs. You’ll be able to decipher your service charge statements and challenge them more easily. You won’t need to extend your lease multiple times at huge cost. You’ll be able to take over the management of your building far more easily, if you and your fellow leaseholders so wish.
It’s a new world for leaseholders who have been crying out for a fairer system for years.
Housing Secretary, Michael Gove summarised the bill:
“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.”
