Summary
At the time that the next UK general election was called by the UK government on 22 May 2024, several pieces of legislation affecting property in England and Wales were already making their way through Parliament on the path to receiving royal assent. However, whilst some of the reforms were passed before Parliament was dissolved on 24 May 2024, not all of them made it through.
Leasehold and Freehold Reform Act
The Leasehold and Freehold Reform Act 2024 (the LFRA 2024) was one of the last bills to be entered into the statute books in the Parliamentary "wash-up" period which is the last opportunity to pass legislation before dissolution ahead of the election. The legislation was originally heralded as "part of the most significant reforms to the leasehold system for a generation" by the Government when it was first introduced to the House of Commons in November 2023. However, as it passed through the parliamentary process, it soon became clear that some of these key reforms would be watered down and others dropped entirely in the rush to get the bill passed in time.
What has been introduced by the LFRA 2024?
We previously summarised the reforms proposed in the Leasehold and Freehold Reform bill in our first edition of RED Alert for 2024 which you can find here. Many of these reforms did make it into the final version. In particular, the Act contains provisions to:
- ban the creation of new leasehold houses, subject to a very limited list of exceptions
- remove the two-year ownership requirement before a leaseholder will qualify to extend their lease or purchase the freehold, therefore allowing leaseholders to act immediately
- allow leaseholders to extend their leases by an additional 990 years (as opposed to 50 years for houses and 90 years for flats under the previous legislation)
- allow leaseholders in mixed used buildings with up to 50% of commercial space to enfranchise or take over the management of the building (this threshold was previously set at 25%)
- make it cheaper for leaseholders to extend their leases and purchase the freehold of their property by introducing a new valuation method for calculating the premiums payable to landlords and removing the requirement for tenants to pay the landlord's costs associated with these processes
- abolish marriage value for leases under 80 years
- require that all service charge demands are issued in a standardised format to increase the transparency for leaseholders.
Whilst many of these reforms are welcomed by those advocating change to the leasehold system in England and Wales, the LFRA 2024 has been widely criticised for failing to deliver on many of the promises previously made by the Government. The notable omissions included:
- The LFRA 2024 does not include any abolition or cap on ground rents for existing leases, a proposition which had been opposed by investor landlords who are concerned about the impact on their portfolio.
- The LFRA 2024 does not introduce a ban on forfeiture of long residential leases after an amendment to do so was voted down by MPs.
When will it be in force?
One side effect of the last-minute rush to pass the LFRA 2024 relates to the timeline for implementation. Crucially, many of the reforms contained in the LFRA 2024 are dependent on the passing of secondary legislation, save for a number of provisions relating to rent charges and amendments which will come into force in July 2024. There is therefore significant uncertainty as to when, if ever, these reforms will come into force and what they will look like in practice.
The Renters Reform Bill
Unlike the LFRA 2024, the much-anticipated Renters Reform Bill did not make it through the wash-up and has therefore been shelved for the moment. Whilst the bill proposed a number of reforms to benefit renters in England and Wales, one of the central proposals was to abolish so-called "no-fault" evictions under section 21 of the Housing Act 1988.
What happens now?
Notwithstanding the piecemeal approach adopted in the LFRA 2024 and the scrapping of the Renters Reform Bill, reform in this area is still a hot topic with most of the major political parties expressing commitments to further changes in their manifestos. It is therefore clear that story of leasehold and renters reform is only just getting started.
However, regardless of who claims the victory on 4 July, it remains to be seen whether these issues will be prioritised by the future Government. Indeed, Labour have recently abandoned their pledge to abolish leasehold within 100 days if elected and the protracted implementation of the current LFRA 2024 as enacted under the Conservative Government will undoubtedly cause delay. Current indications suggest that the industry will be waiting until 2025/2026 to see any real change but we will have to watch this space!
