New Labour Government Unveils Sweeping Leasehold Reforms

In terms of residential property, we have immediately got an answer to the question of how the new Government intend to follow up the previous Government’s Leasehold and Freehold Reform Bill (which became the Leasehold and Freehold Reform Act 2024). The Government have brought forward their proposals under the Leasehold and Commonhold Reform Bill.

Key points to note from the proposed Bill are the following:

• The headline announcement for leasehold owners is the removal of forfeiture as an enforcement measure. In their background notes to the King’s Speech the Government have said, “Landlords need an effective way to recover debts but the fact this can happen over what might be a small breach underlines its draconian nature.” Great news for leaseholders for sure but it will be interesting to see how landlords react to this quite significant step and, more importantly, how they intend to appease landlords in return and show what “an effective way to recovery debts” will look like.

• An equally eye-catching announcement is the reform of commonhold and restricting the sale of new leasehold flats. This will be easier said than done – it is worth remembering commonhold was introduced in 2002 and to this day there is less than 20 commonhold blocks in England and Wales. The Government have said they will consult on the best way to meet these two goals, but the key will be bringing developers to the table as that is in no small part why commonhold never took off originally.

• Tackling existing ground rents. Another notable change and again another which will require major consultation with landlords across the country. It will of course be a major benefit to leaseholders to be protected against “unregulated and unaffordable costs” but the effect this could have on ground rent portfolios, particularly relevant to pension trusts for example, could be huge.

• The Government will look to implement the provisions of the Leasehold and Freehold Reform Act 2024 quickly. This is good news as the Leasehold and Freehold Reform Bill was rushed through Parliament on the last day before its dissolution. Much of that Act is not yet in force and will require secondary legislation to become operative – it is therefore good news the new Government intend to bring these measures into effect and thus will resolve some of the uncertainty that remains regarding the Leasehold and Freehold Reform Act 2024.

• Ending the injustice of ‘fleecehold’ private estates. Again, the Government have said they will consult on how they will achieve this, but they will face a significant challenge.

• Enacting the remaining Law Commission recommendations in relation to lease extensions, enfranchisement and right to manage.

The above will appeal to leaseholders across the country but landlords and management companies will be recoiling at that news. There is a fine balance to find between the interests of leaseholders being protected and the commercial interests of both landlords and management companies. We saw with the last Government that compromise was made on certain areas and it will be intriguing to see how the new Government addresses this on those substantial changes. Now though, for all concerned, it is very much watch this space.

If you have any questions or queries in how these changes may affect a property you already own or are in the process of buying, then our residential team is here to assist you.