The Leasehold and Freehold Reform Bill gains Royal Assent

The Leasehold and Freehold Reform Bill had been working its way through Parliament and had reached the Report Stage in the House of Lords when Rishi Sunak announced a General Election for 6 July 2024.  In a somewhat surprising development, the Bill made its way into the wash up, which is where Parliament considers a small number of Bills before Parliament is dissolved to see whether agreement can be reached for these to be passed.

After a three and half hour debate in the House of Lords on 24 May 2024, the Bill received Royal Assent and became law.

What made it into the Act?

We have summarised the key provisions of the Act in our Insight: Overview of the Leasehold and Freehold Reform Bill: What are the key provisions?  Since the date of that insight, the Act does now include a ban on the creation of new leasehold houses, except in very limited circumstances.

What did not make it into the Act?

The Government consulted on capping ground rents in existing leases but their response to the consultation has not yet been published and the Act does not contain any provisions capping ground rents in existing leases.

When does the Act come into force?

Part 9 of the Act came into force on 24 May 2024.  This enables the Secretary of State to make Regulations under the Act. 

A number of provisions concerning Building Safety and rentcharges will come into force on 24 July 2024, two months after the Act was passed.  These include a provision to enable residents’ management companies (where the majority of shares are held by leaseholders) and RTM companies to recover legal and professional costs by way of service charges where those costs relate to an application for a remediation contribution order under Section 124 of the Building Safety Act 2022 (“BSA 2022”), but only where those costs were incurred after 24 July 2024. 

In addition, there are new duties on insolvency practitioners appointed in relation to a responsible person for either a higher-risk building or a building containing at least two dwellings which is at least 11 metres high or has at least 5 storeys.  A responsible person is an accountable person under Section 72 of the BSA 2022 for higher-risk building and where the building is below 18 metres, it is the person who would be the accountable person if the building was a higher-risk building.  The insolvency practitioner is required to give certain information to the relevant local authority, fire authority or for higher-risk buildings, to the Building Safety Regulator.  The deadline is very short being 14 days beginning with the day on which the insolvency practitioner is appointed.

The remainder of the Act, including the changes to lease extensions, enfranchisement, service charges and freehold estate management charges will require secondary legislation to bring it into force.  In addition, there is quite a lot of detail missing from the Act which will need to be contained in secondary legislation, such as the deferment and capitalisation rates for calculating a lease extension premium.  Timing wise, much is likely to depend on the result of the general election and the priorities of whichever party wins.

Many in the residential sector had also been following the Renters (Reform) Bill which intended to ban Section 21 Notices and Assured Shorthold Tenancies, amongst other things.  This was dropped as a result of the dissolution of Parliament.  However, an incoming Government could revive it and take it forward in the forthcoming Parliament.

We are tracking developments on our Essential Residential Hub and our timelines: Changing landscapes in residential leasehold and Evolution of the private rented sector.

Please do not hesitate to contact Laura Bushaway, Lauren Fraser, Natalie Deuchar or your usual Charles Russell Speechlys contact if you have any queries.