The King’s speech to Parliament outlining the upcoming legislative agenda has confirmed plans to continue with leasehold reform under the Commonhold and Leasehold Reform Bill. A new Remediation Bill will include powers to make construction product manufacturers contribute toward the cost of replacing unsafe cladding.
The Commonhold and Leasehold Reform Bill has been extensively previewed and will set out to cap ground rents, ban the use of leasehold tenure in new build flats, and introduce commonhold tenure for shared buildings.
In April, Matthew Pennycook, the minister of state for housing, communities and local government, described commonhold as not just an alternative to leasehold, but a “radical improvement”. In a speech at the Institute for Government, he added leasehold is a barrier to a “fair and efficient modern residential property market”.
The King’s speech also included plans to deliver a new voluntary digital ID scheme in a Digital Access to Services Bill, which will initially focus on accessing public services.
Responding to the speech, Law Society of England and Wales president Mark Evans said: “While the UK government has set out a range of new legislative reforms across the justice system, it is vital that these measures are backed by sustained investment to address longstanding pressures and ensure access to justice for all.
“The draft Commonhold and Leasehold Reform Bill represents a significant step towards introducing commonhold as the default tenure for new flats. However, commonhold will only succeed if it operates within the realities of the housing market, the mortgage lending environment and the conveyancing process.”
Scott Goldstein, property disputes partner at Payne Hicks Beach, said: “The reform of the leasehold system is set to shake up the housing sector.
“Developers will no longer be able to hold onto freeholds once construction finishes, tightening their ground rent income, which is already reduced with the upcoming cap in 2028.
“The further loss of earnings from lease extensions could prompt developers to recoup costs by upping the price of new build flats. Developers may also turn their attention towards projects not affected by the leasehold restrictions, such as Build to Rent schemes or social housing. Buyers may soon find themselves footing more of the bill as the industry adapts to these sweeping reforms.”
The Residential Freehold Association (RFA) said leasehold reform would be “a wholly unjustified interference with existing property rights which, if enacted, would seriously damage investor confidence in the UK housing market and send a dangerous and unprecedented signal to the wider institutional investment sector.”
A spokesperson for the RFA explained: “These proposals would transfer significant value from pension funds and other long-term investors to wealthy overseas buy-to-let landlords who make up a significant proportion of leaseholders in the UK.
“The previous government’s own impact assessment suggested a retrospective cap could cost around £30 billion, while the resulting forced exit of professional freeholders from the sector risks hindering building safety projects without addressing rising service charges.
“We urge the government to instead prioritise reforms that would deliver meaningful real-world benefits for leaseholders, including regulating managing agents, improving transparency and raising professional standards across the sector.”
Caroline Wild, counsel in the Real Estate Disputes team at Forsters, said it was unsurprising to see leasehold reform in the King’s Speech, given the “pressure on the government to deliver on its manifesto commitment”.
She added: “With leasehold reform now politically inevitable, any forthcoming bill is likely to represent one of the most significant overhauls of property ownership for generations. However, while the political intent is clear, the government still faces a considerable challenge in balancing the competing interests at play.
“If the balance is not struck, there is a real risk that the property market could be left in a prolonged state of uncertainty, with leaseholders potentially worse off than they were before.
“Designing a workable transition from leasehold to commonhold will be extremely complex, as Matthew Pennycook has recently acknowledged. He suggests that this challenge will be eased by incorporating the remaining Law Commission recommendations on enfranchisement and the Right to Manage into any forthcoming Bill.
“However, key issues still need to be addressed, including the existence of development value as a barrier to enfranchisement and the need for stronger protections for existing leaseholders. The regulation of managing agents is key too, as is the bringing into force those reforms to the leasehold system already on the statue book.
“The government maintains that by addressing these issues in the round, change will be carefully considered, properly sequenced, proportionate and fair – thereby minimising the risk of market disruption and avoiding the creation of a two-tier system.
“The Court of Appeal proceedings challenging aspects of the Leasehold and Freehold Reform Act 2024 add a further layer of uncertainty to the government’s reform programme. While the High Court upheld the legislation, permission to appeal has now been granted, and the outcome is likely to have significant implications for the wider reform agenda — including the future viability of measures such as the proposed ground rent cap.”
2 responses
Be afraid. Be very afraid if you are either an existing leaseholder or freeholder.
A well intentioned, but technically illiterate government has blundered into a world it really does not understand.
The absence of conveyancing practitioner perspective from this debate is also something of real concern.
Combined with the shortcomings of the Building Safety Act all you are often left with are shattered dreams, as the public sits trapped in stigmatised flats.
A tragedy.
“The absence of conveyancing practitioner perspective from this debate is also something of real concern.” We need to ensure that this does not heppen. the conveyancing profession needs to be involved if this is to have any chance of working.