Will New Law Help Leaseholders or Landlords?

One of the final acts of this parliament was to pass the Leasehold & Freehold Reform Act. After months of debating, the Act was rushed through to ensure it passed into law before the election. 

Although the government has stated the Act will "make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges" we do not know when the various provisions will take effect.

According to the government website, the following changes are included in the Act:

• A ban on the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.
• Changes to lease extensions, so that leaseholders no longer have to have owned their house or flat for 2 years before they can extend their lease or buy their freehold.
• Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats).
• Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about the charges they pay, and the ability to challenge how reasonable they are.
• Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
• Making it cheaper for leaseholders to exercise their rights to acquire the freehold of their property as they will no longer have to pay their freeholder’s costs when making a claim.

Levelling Up Secretary Michael Gove, who had originally wanted to place a cap on ground rents, moved instead to a £250 cap on ground rents; however, that has not come to fruition.  In a bid to rush the legislation through, the cap on ground rents has been dropped entirely. This will come as a relief to many freeholders who were concerned that a cap would damage the value of their investments; however, it will not help those leaseholders who are facing difficulties where ground rent levels are affecting affordability and the ability to sell their property.

We will have to wait and see when these provisions come into force and, indeed, how the results of the election affect the provisions of the Act and the future of freehold and leasehold law.

If you are a landlord or tenant who requires advice from an expert lawyer, contact us today to find out how we can help.