Success of leasehold reform rests on fundamental amendments

The Leasehold and Freehold Reform Bill passed its Second Reading in the House of Commons on 11 December 2023 and was broadly welcomed with cross-party support, despite criticism that it does not go far enough.

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Key measures left out of draft Bill

Central provisions of the reforms, as set out in the King’s Speech on 7 November 2023, were left out of the version introduced to Parliament - including the ban on new leasehold houses, the elimination of marriage value, and the requirement for managing freeholders to belong to a redress scheme.

This has caused significant concern, but the UK Government has said it intends to introduce these as amendments to the Bill as it makes its way through the parliamentary process.

Shadow Housing Secretary Angela Rayner, MP, stated that if in power the Labour Party would go further and implement all the measures recommended by the Law Commission, including making commonhold the default tenure for all types of home.  

A pragmatic approach to a complex area

The Bill is the second part of a legislative package to reform leasehold law. It follows on from the Leasehold Reform (Ground Rent) Act 2022, which put an end to ground rents for most new residential leasehold properties in England and Wales.

Moving the second reading, the Secretary of State for Levelling Up, Housing and Communities, Micheal Gove, MP, said the Bill had a deliberately tight focus to make sure there was enough time to deliver it in this Parliament.

He insisted the legislation would ensure a ban on new leasehold houses and help deal with the current situation by squeezing every possible income stream used by freeholders, which would mean the effective destruction of the leasehold system.

Peppercorn ground rents the preferred option

Alongside the Bill, the Government launched a consultation seeking views on options to restrict ground rents for existing leaseholders. The deadline to respond has been extended to 17 January 2024.

During the debate, Mr Gove was clear that his preferred option was to cap ground rents at a peppercorn, effectively zero, which would align them with new leaseholds established since 30 June 2022.  

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10 Nov 2023
Peppercorn rents are the only option to align new and existing leaseholders

Hard work needed in the next stage

The Bill will now move to the Committee stage where it will be examined line-by-line and amendments will be considered before it returns to the Commons for a Third Reading.  

In addition to the key changes already promised, Gove stated that both the right to manage and abuse of forfeiture (a clause in lease agreements which allows the freeholder to evict the leaseholder for breach of the lease) should be looked at in detail by the Committee.

The Second Reading debate of the of Leasehold and Freehold Reform Bill has clearly highlighted the need for regulation of property agents and for the UK Government to look seriously at implementing the recommendations in Lord Best’s report.

Overarching regulation of the sector is needed to support these reforms as well as proposals to change the private rented sector under the Renters (Reform) Bill. Regulation of property agents can protect consumers from bad practice and support businesses, ensuring fair competition and a level playing field for all. Propertymark will continue to make the case for regulation as the Bill makes its way to Committee Stage.

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Timothy Douglas Head of Policy and Campaigns | Propertymark