The Association of Leasehold Enfranchisement Practitioners (ALEP) has received an update from Government on its intended programme of leasehold enfranchisement reform, which makes a commitment to further reforms “within this Parliament”.
In a letter dated 13 June, Lord Greenhalgh, Minister of State at the Department for Levelling Up, Housing and Communities, reiterated the aim of making home ownership “cheaper, fairer and more secure” and advised that the Government is committed to delivering the second phase of its two-part leasehold reform within this Parliament.
The first phase, the Ground Rent Act, is due to come into force on 30 June 2022, and will effectively abolish ground rents on new leases of houses and flats.
Lord Greenhalgh advised that the second phase of reform will focus on simplifying valuation, including the abolition of marriage value and introduction of prescribed rates for the calculation of market value. An online calculator will also be introduced, with the general aim of ensuring “standardisation and fairness” during in valuation.
Mark Chick, Director of ALEP, said:
“As an Association we were delighted to receive Lord Greenhalgh’s letter of 13 June 2022 updating us in relation to our request for further information about the Government’s likely programme of reform.
The changes that are being proposed were discussed in the Law Commission’s reports (published July 2020) and will no doubt be the subject of vigorous debate given the highly political nature of the recommendations.
Making the statutory lease extension term 990 years (rather than 90 years) in addition to the existing term can likely be dealt with by amendments to existing legislation, so there is a very good chance that new legislation to deal with this aspect will come before parliament ahead of the next election in May 2024.
The proposed reforms would mean significant changes to the way that leasehold work is dealt with, particularly as regards valuation. It remains to be seen what the level of backing there may be in Parliament for such legislation, given that the reforms would involve a significant shift in economic benefit from freeholders to leaseholders. Indeed, it is interesting that Lord Greenhalgh’s letter refers to ensuring that sufficient compensation would be paid to landlords, no doubt to anticipate the possibility of a Human Rights Act challenge.
ALEP is delighted to be consulted and responded to directly in relation to the Government’s proposals and continues to engage with the government on leasehold and commonhold reform. We anticipate a lively debate in the months ahead.”
Also commenting on the first phase changes due to come into force on 30 June, CILEX (Chartered Institute of Legal Executives) head of policy, Jonathan Walker said:
“The ban on ground rents is positive news for anyone considering buying a leasehold property and important progress towards ensuring safety and security for all householders.
Problems still remain however, and it is disappointing that there is no retrospective inclusion of current leasehold tenants within the Act. They will still be obliged to pay their existing rents, even in cases where they are seeing those rents escalate – some doubling every ten years. Those attempting to sell on properties will find ground rents prove unattractive to buyers who now have the option of purchasing a rent-free leasehold property, and many will experience difficulties when looking to remortgage, or extend or vary their existing leasehold.
Such fundamental changes to the leasehold market must be implemented alongside awareness raising and education amongst both consumers and professionals so that both understand the implications for property transactions.
It is vital that we see a continued programme of reform that benefits those who are new to the leasehold market whilst not disadvantaging or restricting those currently within the system. We hope to see further measures to address residential leasehold houses and cap ground rent for all existing leasehold properties.”
