Leasehold and Freehold Reform Bill
The Leasehold and Freehold Reform Bill is currently making its way through Parliament and is expected to receive Royal Assent by Summer 2024. If implemented, it will make substantial changes to enfranchisement, lease extensions, right to manage, service charges payable under long residential leases and freehold estate management charges.
The Bill will change the qualifying criteria for lease extensions and freehold acquisitions so it is no longer necessary to own a property for 2 years before making a claim. When extending the lease of a house or flat, a tenant will acquire a 990-year lease extension rather than an extension of 50 years for a house and 90 years for a flat with ground rent reduced to a peppercorn. The non-residential limit will be increased from 25% to 50% which will bring more mixed-use buildings within the scope of collective enfranchisement and right to manage. Finally, there will be a new methodology for calculating the premiums payable. The full picture of valuation may not be clear until secondary legislation is published with the relevant rates but the Bill aims to reduce premiums.
There will be substantial changes to the regulation of service charges and estate management charges with specified form demands and accounts. There will be new statutory rights for information and for the first time, those paying estate management charges will have the right to challenge the reasonableness of estate management charges in the same way that leaseholders can currently challenge residential service charges. A landlord’s entitlement to claim litigation costs from tenants of dwellings will be severely curtailed and it will be necessary for an application to made to the Court/Tribunal to seek an order for payment as an administration charge from the defaulting lessee or by way of service charges.
The Bill will also ban the creation of new leasehold houses, although those provisions will be added to the Bill at a later date and were not in the draft which had its first reading in the House of Commons on 27 November 2023.
The next timetabled phase for the Bill is Committee Stage to be concluded by 1 February 2024 with a line by line examination of the Bill.
For more information, see here for our Expert Insight: Overview of the Leasehold and Freehold Reform Bill: What are the key provisions?
Ground Rent Consultation
At the end of 2023, the Government consulted on capping ground rents in existing long residential leases in England and Wales. This is a potentially seismic change affecting residential investors, stakeholders, landlords and tenants. With the consultation period due to close on 17 January 2024, the Government’ response is anticipated during early 2024. Michael Gove has already indicated a desire to cap ground rents at a peppercorn but other options are set out in the consultation paper. The proposals are anticipated to form part of amendments to the Leasehold and Freehold Reform Bill, as it continues its passage through Parliament. For more information, see our quick read here.
Levelling Up and Regeneration Act 2023
The Act received Royal Assent on 26 October 2023. Some provisions are brought into force on 26 December 2023 but further provisions are anticipated to be implemented throughout 2024 including:
Short-term lettings registration scheme
The Act gave the Secretary of State the power to make regulations governing a short-term lettings registration scheme in England. This is expected to catch properties let via Airbnb and other short-term lettings platforms. The regulations will include details of who must maintain the register, what information must be included and the conditions that must be satisfied for a short-term rental property to be registered. The Government consulted on a registration scheme in May 2023 and indicated that the scheme would be operational in 2024. Secondary legislation fleshing out the full details of the scheme is anticipated by mid-way through 2024.
