Property industry reacts after leasehold reforms become law

property-industry-reacts-after-leasehold-reforms-become-law

Homeowners will now receive more rights, power and protections over their homes under the Leasehold and Freehold Reform Act, although plans to remove ground rent for existing leaseholders or cap it at £250 were dropped when the new legislation was passed on Friday.

The Leasehold and Freehold Reform bill was one of the last pieces of legislation to make it through Parliament on Friday before it was shut down for the general election on 4 July.

Housing secretary Michael Gove, who announced last week that he will be stepping down as an MP, had originally wanted to cap ground rents at nominal level.

That was changed to a planned £250 cap – but the proposal was scrapped altogether as the legislation was rushed into law at the last minute on Friday evening.

Industry reactions:

Robert Poole, director of Glide (part of Leaders Romans Group), said: “For years, the leasehold system has been a topic of contention, leaving homeowners and managers of blocks of flats grappling with uncertainties. The Leasehold and Freehold Reform Act aims to introduce measures to increase leaseholders’ rights, provide them with more control over their properties, and make lease extensions more affordable. It heralds a landmark shift in the leasehold system and a future in which  homeowners are granted greater autonomy over their homes, with reduced costs and red tape.

“So it is good news that the Leasehold and Freehold Reform Act has passed into legislation imminently despite many other Bills falling victim of the general election’s timing.

“As leasehold reform moves forward, the changes will undoubtedly create some challenges. A thoughtful and comprehensive approach that consults widely with practitioners, leaseholders and freeholders and considers all potential challenges is necessary to make the transition as smooth as possible.”

Timothy Douglas, head of policy and campaigns at Propertymark, commented: “The recently passed leasehold legislation is far from perfect, but it is the start of reform to outdated legislation that was not fit for purpose.

“Once implemented the new laws will make it more commonplace to extend a lease and information about leasehold property will be made more transparent, which will make buying, selling and renting leasehold property easier.

“However, the legislation is a missed opportunity to tackle some key issues. Propertymark argued that the legislation needed to go further to incorporate the recommendations for the Regulation of Property Agents. At a time where building safety regulations have increased and become more complex, it is shortsighted that policy makers were unwilling to see the benefit to consumers of qualifying and licensing the competency of those who work in the property sector.”

A spokesperson for The Residential Freehold Association, remarked: “The Leasehold and Freehold Reform Bill is a defective and poorly evidenced piece of legislation which has ignored the outcomes of consultation with industry and leaseholders alike.

“The government has pushed this Bill through without proper scrutiny and as a result there is work to be done to ensure there are no unintended consequences that will negatively impact leaseholders.”

John Jones, head of residential property at Jackson Lees, noted: “There has been much debate about this bill and whether it goes far enough but, whilst it is far from perfect, it is progress, nonetheless.

“It does not address all the problems leaseholders face, such as ground rents which many argue should be capped or scrapped altogether, but it does put them in a better position than before.

“It also represents the biggest shake-up of the leasehold system in decades, and that has to be better than it being paused for the general election and left languishing on what will undoubtedly be a very long list of priorities under the new government.”

Linz Darlington, managing Director of leasehold extensions specialists, Homehold, added: “This limited bill is a muted win for leaseholders. While the legislation is not without merit, leaseholders must see it as a step in a journey rather than the destination itself.

“The bill does not contain many of the important provisions that were promised by the Government. The commitment to remove ground rent for existing leaseholders, or even cap it at £250, has not been included.

“Another notable omission from the bill is the prevention of forfeiture, a draconian measure that allows a freeholder to repossess a flat for a debt of just £350.

“Frustratingly, most of the changes which have been included will not come into effect immediately or even within a specified timeline. These included-but-delayed changes include banning leasehold houses, and also abolishing marriage value which could make it cheaper for leaseholders with fewer than 80 years left to extend their leases.

“Instead, we will have to wait for additional legislation to fill in the gaps – and the bill’s impact assessment suggests this won’t be in place until 2026. This secondary legislation – which will set the key rates used to calculate lease extension and freehold purchase prices – will also have the potential to make lease extensions more expensive for those with leases above 80 years and lower ground rents.

“It was also clear from comments made in both houses that it is anticipated that the freehold sector will respond to this bill through litigation. They will argue in court that provisions that make it cheaper for leaseholders with short leases to extend them infringe upon their human rights. We may have to wait for the outcome of these legal challenges before leaseholders can benefit from the reform.

“The lack of scrutiny that such a complex bill has had was consistently mentioned in the House of Lords. Invariably, as the final bill is scrutinised by the lawyers and valuers who will practice this area of law, there will be errors and omissions identified. These will need to be resolved either through further legislation or litigation.

“As promising as this step is, it will be the responsibility of the next government, and the timeline they set, to get leasehold reform to the point it will actually benefit leaseholders.”

Are you familiar with the leasehold reforms?

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