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On 21 December 2017, following a consultation exercise, the Government announced plans to tackle the growing problem of newly built houses being sold as leasehold rather than freehold, and to limit ground rents on newly created lease agreements. Leasehold reform was included in the Law Commission’s 13th Programme of Law Reform – this work includes identifying ways to make buying a freehold or extending a lease “easier, faster, fairer and cheaper.”
Full details can be found in the Library briefing paper Leasehold and Commonhold Reform.
The 2017 Government’s consultation paper on Implementing reforms to the leasehold system in England (PDF 377 KB), published on 15 October 2018, sought views on implementing the commitments set out above, specifically:
- How to ban the unjustified use of leasehold for new houses.
- How to reduce future ground rents to a nominal value.
- How to bring about fairer and more transparent service charges for freehold properties. For more information, see our page on Freeholder’s estate and service charges.
- How to improve the process of selling leasehold properties.
The outcome of this consultation exercise was published on 27 June 2019: Implementing reforms to the leasehold system in England: summary of consultation responses and government response (PDF 578 KB).
The aim is to legislate “as soon as Parliamentary time allows”. The legislation, when published, will be informed by the outcome of the Law Commission’s work and other, related consultation exercises (see below). On 13 January 2020, the Secretary of State, Robert Jenrick, referred to the publication of a draft Bill “shortly”. The timing of legislation is likely to have been impacted by the need to tackle the Covid-19 outbreak.
The Law Commission’s work
The Law Commission’s work on leasehold reform is complete. The Commission carried out a full review of enfranchisement law and procedure. Enfranchisement is the term used to describe buying the freehold interest or extending a lease agreement.
On 19 July 2018, the Commission published proposed measures (PDF 477 KB) to help existing leasehold homeowners buy the freehold of their houses. This was followed in September 2018 with a consultation paper (PDF 7.12 MB)– responses were invited up to 20 November 2018. The paper proposed “a new, single regime for leasehold enfranchisement designed to benefit leaseholders of houses and flats.” A summary version of the consultation paper (PDF 884 KB) is available.
On 9 January 2020, the Commission published Leasehold home ownership: buying your freehold or extending your lease – Report on options to reduce the price payable (PDF 3.49MB). A final report on reforming all aspects of leasehold enfranchisement was published on 21 July 2020 entitled Leasehold homeownership: buying your freehold or extending your lease (PDF 13.91MB). A summary report (470 KB) was published alongside.
The Law Commission also reviewed leaseholders’ Right to Manage. A consultation exercise was launched in January 2019 with a closing date of 30 April 2019. A final report was published on 21 July 2020: Leasehold home ownership: exercising the Right to Manage (PDF 3.68MB). There is also a summary document (414 KB).
The Law Commission issued Commonhold: A Call For Evidence (PDF 771 KB) on 22 February 2018 – submissions were invited up to 19 April 2018. A public consultation exercise was launched on 10 December 2018 with submissions accepted up to 10 March 2019. The final report was published on 21 July 2020: Reinvigorating commonhold: the alternative to leasehold ownership (PDF 5.78MB) together with a summary document (PDF 647 KB).
Kelly Tolhurst responded to a PQ on the Government’s timetable for responding to the Commission’s final reports on 5 October 2020:
The Law Commission reports on the enfranchisement process, commonhold and Right to Manage were published in July, following their January report on valuation. We are considering these in detail and will set out our preferred way forward in due course.
Onerous ground rents for existing leaseholders
On 28 March 2019, the Government published a new industry pledge which around 64 developers/agents have signed up to. The pledge sets out an intention to help existing leaseholders with onerous ground rent terms in their lease agreements.
Related Government proposals
The Government has said it will:
- Require all property/managing agents to be regulated. A working group has developed recommendations for the regulatory regime – the group published its report, Regulation of Property Agents Working Group: Final Report (PDF 655 KB), in July 2019. The Government is considering the recommendations.
- Make buying and selling a leasehold property easier with timescales for agents and freeholders to respond to leasehold queries and maximum fees. There is an intention to introduce standard mandatory forms for leasehold information.
- Establish a Redress Reform Working Group with ombudsmen and redress schemes to help drive the programme of reform, including the establishment of a housing complaints resolution service. The Group was established in January 2019.
Leasehold reform in Wales
On 1 May 2018, the Welsh Housing and Regeneration Minister at that time, Rebecca Evans, announced that the Welsh Government had formally joined the Law Commission’s leasehold reform project. A multi-disciplinary task and finish group on leasehold reform was established. The Task and Finish Group issued a report, Residential Leasehold Reform (PDF 892 KB), in July 2019. The report was described as “just the end of the first key stage of the work” the Group is undertaking.
On 6 February 2020, Julie James AM, Minister for Housing and Local Government, referred to the publication of final reports by the Law Commission (due in Spring but published in July 2020) and said she would update Members with her intentions once the findings had been considered.
She announced a Call for Evidence on charging freehold owners for the upkeep of communal areas on estates (estate charges). Submissions were invited up to 30 April 2020. Analysis of the responses is underway – it is anticipated that the outcome will be published before 30 November 2020. Julie James also highlighted the issue of poor management of leasehold properties and said:
To address this I have commissioned work to develop a new accreditation scheme for those companies which are engaged in the management of leasehold properties as well as housing developments where estate charges are in use. The scheme will be voluntary in the first instance with a view to it becoming mandatory in the future.
The Commons Library does not intend the information in this article to address the specific circumstances of any particular individual. We have published it to support the work of MPs. You should not rely upon it as legal or professional advice, or as a substitute for it. We do not accept any liability whatsoever for any errors, omissions or misstatements contained herein. You should consult a suitably qualified professional if you require specific advice or information. Read our briefing for information about sources of legal advice and help.