King’s Speech: Leasehold and Freehold Bill

King Charles has announced that a Leasehold and Freehold Bill will ban leaseholds for new houses, but not new flats, in England and Wales, and increase the standard lease extension period to 990 years.

In the King’s Speech, the Conservatives have committed themselves to ensuring that all new homes in England and Wales will have to be sold as freehold properties.

Levelling Up Secretary Michael Gove intends to phase out the “feudal” leasehold system in England and Wales. Ministers also want to cap all ground rents on existing leasehold properties to a “peppercorn” rate, as well as change the standard contract lease extension from 90 years to 990 years.

They also want to end the requirement for someone to have lived in a property for two years before they can propose an extension. The UK Government recently confirmed that it has agreed a pledge with five sector-leading insurance brokers, which could mean thousands of leaseholders in buildings with identified fire safety issues witness a substantial reduction in their insurance premiums.

They are also promising to have a cap of 15% on the proportion of the premium that brokers take to compensate for their work in arranging the insurance. The Financial Conduct Authority (FCA) report on broker remuneration found that this amount can be as high as 60% of the cost of the premium paid by leaseholders.

Also, the Renters Reform Bill will be carried over to the next Parliament, as confirmed in the King’s Speech. However, Section 21, which allows landlords to evict tenants on a shorthold tenancy, will not be scrapped until the court possession process is modernised and speeded up. Timothy Douglas, Head of Policy and Campaigns at Propertymark, said:

“Many agents and leaseholders will be relieved to hear plans for new legislation to further reform the leasehold system. However, the UK Government must ensure any legislation to abolish leaseholds is fit for purpose.

For example, there are no reports yet that have confirmed what impact capping ground rents will have on service charges, and it is important to consider that every development is individual, and some may still require aspects that justify specific service charges. As every development will likely have unique characteristics by design, there may well be a need for sensible provision and certain clauses/exemptions where an ongoing management fee might be appropriate. There may well be communal aspects of a development design where a management charge might still be relevant for the upkeep of an area for example.”

Jeremy Raj, Head of Residential Property at Irwin Mitchell, said that it is “difficult to imagine that anything of significance will be achieved” following the announcement. He continued:

“…other than further irritating certain MPs with unrealistic expectations, along with all the vested interest groups within the residential property sector. This includes those proclaiming the need to abolish a ‘feudal system’, those wanting certainty and a better way to structure new developments, those wanting significantly greater protections from abuse for leaseholders, and those wanting to protect and realise their investments. Last but not least, it also disappoints those of us who have been hoping for many years now for a co-ordinated and fundamental overhaul of the areas that have let leasehold down as a system of tenure, and who believe a better way (absolutely not commonhold) is well within our capabilities.

None of today’s proposals deal with the fundamental issues troubling the housing market, such as lack of supply, uncertainty regarding future regulation, unsuitable stock for our environmental ambitions and our population profile, and of course the affordability crisis.”

What’s more, the National Leasehold Campaign (NLC) welcomes the inclusion of leasehold reforms in the King’s speech, but the reforms do “not go far enough”. NLC founder and spokeswoman Katie Kendrick, a children’s nurse from Ellesmere Port said:

“There are over 5 million leaseholders in England and Wales, many of whom live in flats and apartments.  Whilst today’s announcements are a step forward, they don’t go far enough, and leaseholders continue to be taken for a ride by rapacious freeholders.

There is nothing here to tackle the horrors of high service charges, increasing by way above inflation and freeholders taking commissions from suppliers on routine and major works. We would have liked today’s speech to have included a ban on leasehold in totality, not just for houses, and a drive for commonhold to be the default tenure for communal living, as it is across the rest of the World.  Headlines don’t change anything, it’s action we need to see.”

10 Responses

  1. Extensions for 990 years effectively removes the lease extension requirement.
    Freeholders are NOT regulated regards cost for issuing leasehold extensions.. and should be..
    Current minimum 90 years. This change will be a likely green light for freeholders to ramp up the leasehold extension charge.
    Why can’t government legislate simply to remove lease end dates?

    Ground rent calculated at a ‘peppercorn’ apportionment of a property’s value.
    This kind of terminology is completely idiotic. How on earth could anyone challenge that?

  2. Government should regulate cost charged by freeholder for lease extension.
    Regulating the extension period to 990 years (current minimum 90) – will likely be a ‘green light’ for freeholders to increase already exorbitant and unregulated extension fees – to whatever astronomical number the freeholder arbitrarily decides on.

    Why not just remove lease end dates or more practically link them to the lifetime of the building?

  3. What happened to the government’s promise to transform leaseholds into freeholds at a minimal cost, in other words enabling leaseholders to purchase the freehold of their properties at a fraction of the current valuations?

  4. The government has fudge the issue again.
    The feudal system of ‘leasehold’ is so unfair and biased towards the freeholders it needs urgent reform.
    Promised so many times by this administration but they appear so weak when it comes to implementing the required reforms. Really disappointing.

  5. This is supposed to be a leasehold and freehold bill.Why is all the talk about leasehold flats that have building common areas like hallways and stairs fire and security systems that need to be maintained and payed for by the residents.Freehold residents pay for there own property maintance and should not be made to pay service fees.We pay through our council tax for these maintenence services. So ether cut the council tax for freehold residents or do the maintenence work.We should not be asked to pay twice for the same service

    1. why should council tax cover maintenance of common areas in blocks of flats? or fire and security systems? Freehold home owners pay for their security and fire systems. and so should leaseholders.

    2. We absolutely do not pay for fire safety and common area maintenance services through council taxes. Why would you think the council has anything to do with maintaining private property?

  6. A Ban would have been nice but it’s a step in the right direction for Leaseholders . , and it makes it easier to buy The Freehold, which is positive.

  7. I have been waiting for leasehold extension for last 4 yrs. I have only 68 yrs remaining on my flat. When the new leasehold calculator is coming?

  8. To J Southwick above. As a freehold house, not flat, owner, if you are having to pay a service charge for common areas I think you are likely to live in a private road. Many new builds are initially private roads, which will eventually be adopted by the council. But initially all maintenance is down to the owners.

Want to have your say? Leave a comment

Your email address will not be published. Required fields are marked *

Read more stories

Join over 7,000 conveyancing professionals – Check back daily for all the latest news, views, insights and best practice and sign up to our e-newsletter to receive our daily and weekly round ups

You’ll receive the latest updates, analysis, and best practice straight to your inbox.