Leasehold and
Freehold Bill
“My Ministers will bring
forward a bill to
reform the housing market
by making it cheaper and easier
for leaseholders to purchase their freehold and tackling
the exploitation of millions of homeowners through punitive
service charges.”
- The Leasehold and Freehold Reform Bill delivers the
Government’s manifesto commitments on leasehold reform. This
decisive action will address one of the longest-term challenges
that the country faces: fairness in the housing market.
- The Bill will make the long-term and necessary changes to
improve home ownership for millions of leaseholders in England
and Wales, by making it cheaper and easier for more leaseholders
to extend their lease, buy their freehold, and take over
management of their building.
- These reforms build on the success of the Leasehold Reform
(Ground Rents) Act 2022, which put an end to ground rents for
new, qualifying long residential leasehold properties in England
and Wales as part of the most significant changes to property law
in a generation.
What does the
Bill do?
- The Leasehold and Freehold Reform Bill will put the country
on the right path for the future by giving homeowners a fairer
deal in the following ways:
-
Empowering leaseholders:
-
-
Making it cheaper and easier for existing
leaseholders in houses and flats to extend their lease or
buy their freehold - so that leaseholders pay less
to gain security over the future of their home.
-
Increasing the
standard lease
extension term
from 90
years to
990 years for
both houses
and flats,
with ground
rent reduced
to £0. This will ensure
that leaseholders can enjoy secure, ground rent free
ownership of their properties for years to come, without
the hassle and expense of future lease extensions.
-
Removing the requirement for a new leaseholder to
have owned their house or
flat for
two years
before they
can benefit
from these
changes – so that more leaseholders can
exercise their right to the security of freehold ownership
or a 990-year lease extension as soon as possible.
-
Increasing the
25 per
cent ‘non-residential’
limit preventing
leaseholders in buildings
with a
mixture of
homes and
other uses
such as
shops and offices, from
buying their freehold or taking over management of
their
buildings – to allow
leaseholders in buildings with up to 50 per cent non-
residential floorspace to buy their freehold or take over
its management.
-
Improving
leaseholders’
consumer rights:
-
-
Making buying or selling a leasehold
property quicker and easier by setting a
maximum time and fee for the provision of
information required to make a sale (such as
building insurance or financial records) to a
leaseholder by their freeholder (known as
‘landlords’).
-
Requiring transparency over leaseholders’
service charges – so all leaseholders
receive better transparency over the costs they are
being charged by their freeholder or managing agent
in a standardised comparable format and can
scrutinise and better challenge them if they are
unreasonable.
-
Replacing buildings insurance commissions
for managing agents, landlords and
freeholders with transparent
administration fees – to stop
leaseholders being charged exorbitant, opaque
commissions on top of their premiums.
-
Extending access to “redress” schemes for
leaseholders to challenge poor practice.
We will require more freeholders to belong to a
redress scheme so leaseholders can challenge them
if needed.
-
Scrapping the presumption for leaseholders
to pay their freeholders’ legal costs when
challenging poor practice.
-
Granting freehold
homeowners on
private and
mixed tenure
estates the same
rights of
redress as
leaseholders – by extending
equivalent rights to transparency over their estate
charges, access to support via redress schemes, and
to challenge the charges they pay by taking a case
to a Tribunal, just like existing leaseholders.
-
Building on the legislation brought forward
by the Building Safety Act 2022, ensuring
freeholders and developers are unable to escape
their liabilities to fund building remediation
work – protecting leaseholders by
extending the measures in the Building Safety Act
2022 to ensure it operates as intended.
-
Reforming the
leasehold market:
-
-
Banning the creation of new leasehold
houses so that - other than in exceptional
circumstances - every new house in England and
Wales will be freehold from the outset.
- We will also consult on capping existing ground
rents, to ensure that all leaseholders are protected from
making payments that require no service or benefit in
return, have no requirement to be reasonable, and can
cause issues when people want to sell their properties.
Subject to that consultation, we will look to introduce a
cap through this Bill.
Territorial extent
and application
- The Bill will extend and apply to England and Wales.
Key facts
- The Building Safety Act 2022 delivered far-reaching
protections for leaseholders against remediation costs
and an ambitious enforcement regime to hold freeholders
and developers to account.
- There are 752,000 households with children and 1.48
million over-65s who are leasehold homeowners.
- Leasehold reform will support the housing market. 49
per cent of leaseholders are first time buyers, and 28
per cent of leaseholders are under 35. Land Registry data
tells us that 22 per cent of residential property
transactions in 2019 were leasehold – around 238,000
transactions in total. Almost all flats are sold on a
leasehold basis compared to 6 per cent of houses.
- The current leasehold system leaves many homeowners
trapped in their properties or facing extortionate costs
to buy their freeholds, for example:
-
- Case Study 1: Sian paid £225,000 in 2020 for her
new build flat in Southend. Her lease had a ground
rent indexation start date of March 2018 (when the
development started) with 5-year reviews based on
RPI, and so is now due for review. As a result, Sian
has seen her ground rent rise from £350 to over
£450 per year and she is braced for another RPI review in
five years’ time.
- Case Study 2: Zack bought a flat in North Yorkshire
in 2008 with a ground rent of £300 and a 10-year
doubling clause, meaning he now pays £600. Zack wants
to sell the flat and is considering a lease extension
to extinguish the ground rent as he does not think
lenders will lend against a lease with the current
ground rent terms. He has been quoted £25,000 to extend
the lease and cannot afford to pay this sum.
- Our reforms will tackle these issues head on:
-
- We are making it significantly cheaper for
leaseholders to extend their leases. For example, a
young first-time buyer in a £250,000 leasehold flat
in Birmingham with 76 years left on the lease would
currently have to pay around
£16,000 to extend the lease plus around £10,000 to cover
their costs and the freeholder’s costs. Under our
reforms, they will now only pay around £9,000 plus their
own legal costs for a 990-year extension – a saving of
over £10,000.
- The ground rents cap we are consulting on could
save leaseholders up to an average of £250 in year one
and £6,000 over the remaining term of their lease –
that would be £250 back in people’s pockets each year.
This will also make it easier for people to sell their
properties and get mortgages.
