Members of the Association of Leasehold Enfranchisement Practitioners (ALEP) have set out their predictions for the next phase of leasehold reform, with legislation now expected to be introduced in the next parliamentary session.
In February 2023, Housing Secretary Michael Gove announced the Government’s intention to abolish leasehold altogether, stating that he wanted to introduce legislation in the final parliamentary session.
While the government did go on to drop their plans, ALEP members have expressed scepticism that the abolition of leasehold can be achieved without significant further work being done, including greater efforts to make commonhold a viable alternative to leasehold.
Mark Chick, Director at ALEP and Senior Partner at law firm Bishop & Sewell LLP, said:
“Legal and valuation experts alike have little belief that the leasehold system will be abolished any time soon. Meanwhile, there are numerous issues raised by the scale of what would be involved in wholesale reform of the leasehold system, although any reforming act would be massive and would take up a large tract of parliamentary time.”
Discussing potential changes that could be introduced by the government down the line, Chick said:
“Leaseholders currently have a statutory right to extend their lease by an additional 90 years and remove the ground rent under The Leasehold Reform, Housing and Urban Development Act 1993. The Government has previously announced plans to enable all leaseholders with the right extend their lease to do so by 990 years, effectively removing the need to extend the lease again in the future.”
On the potential abolition of marriage value, he said:
“It is likely the Government will take some steps to deliver on its commitment to abolish marriage value, for example, by banning marriage value for new leases, or setting a date in the future for such a ban to take effect. Any reforms are likely face challenges from freeholders, and will probably focus on new leases going forwards rather than making retrospective alterations to existing leases, which would be legally problematic.”
Chick went on to discuss changing the 25% non-residential rule:
“There are changes that could be made to the legislation to make the enfranchisement process easier without changing the valuation basis, such as extending the right to enfranchise to more leaseholders. Under existing legislation, if more than 25% of the internal floor area of a building is used for non-residential purposes (e.g. shops or offices) then the building will not qualify for collective enfranchisement under existing legislation. Reforms could have the benefit of bringing a greater availability of rights to residents of this type of building.”
ALEP added the caveat that any change to the leasehold system that affects the value of freeholders’ investments is likely to face challenges in the courts, and there may be concern from mortgage lenders before they are comfortable with the new forms of tenure and that practitioners are fully familiar with the legislation. They also suggested that Human Rights legislation could be used as the basis for a legal challenge from freeholders whose investments will be impacted negatively.
“We are in a state of limbo until the Government can clarify its plans, which makes it difficult both for practitioners to advise clients and for leaseholders to decide what to do,” concluded Chick:
“Practitioners can only present clients with the information available at the time, advise them on the possible effects, and then let the client decide how to proceed, as each situation is unique and requires individual tailored advice.”
6 responses
It is incredibly irresponsible and damaging to the housing sector for the Government and the Opposition to be making such statements about Leasehold until a definitive plan is in place. If the Government is saying this about Leasehold, why would a buyer seek to purchase Leasehold? Why would a Conveyancer recommend that Leasehold purchase proceeds? Then what happens to existing Leaseholders when they cannot sell?
People buy leasehold properties because they cannot afford freehold houses, and they will continue buying them regardless of what government or anyone else has to say about owning leasehold. Because, what’s the alternative? Continue wasting money on rent… living in a flat?
I wish that were true, leaseholds are just as expensive as freeholds!
Gove made an assurance that leasehold reform was high on his agenda. This was a lie and will lose them probably over a million votes from leaseholders at the next GE.
I have 85 years remaining on my lease and plan to sell in 2 years. The lack of clarity over the reforms is putting me, and many many others, in a very difficult position.
Leasehold is a feudal system. We can’t allow that remains in England and Wales. We shall follow Scotland and NI joining the civilized world.
It must be remembered that the cost of buying leasehold with a lease lasting 99 years or less is a good deal less
than buying freehold. When the lease expires the freeholder regains the property. Already the law favours
leaseholders if they wish to extend their leases; if they do the freeholder does not regain the property. If the law
changes again in the leaseholders’ favour the freeholder’s rights will have been stolen from him. This is an
extremely unfair situation and I am amazed that Michael Gove is involved. Sad to say, but leaseholders do not, on
the whole, look after a property well and argue constantly amongst themselves about the overheads.