What is the Leasehold Reform Bill?
The Leasehold Reform Bill is a proposed change to the law in England and Wales that aims to give leaseholders greater rights and powers. The bill is currently being considered by Parliament and is expected to become law in 2024, however, it is important to note that all the reforms put forward in the draft bill might not make it into the final bill.
What are leasehold properties?
When you buy a leasehold property, you don't own the land it's built on. Instead, you buy the right to live in the property for a fixed number of years. This lease is typically for 90 years for flats and 50 years for houses. You will find that almost all landlords of flats in blocks are leaseholders, we place the tenant and collect the rent on their behalf, pay the rent to them and then they pay the freeholder of the block any charges in their leasehold agreement, such as service charge and ground rent.
What are the problems with the current leasehold system?
Leaseholders can face many problems, including:
- Escalating ground rents: Ground rent is a charge that leaseholders pay to the freeholder of the land. Ground rents can double or even triple throughout a lease, making it difficult for leaseholders to afford their homes.
- Expensive lease extensions: Leaseholders can extend their leases to give themselves more security, but this can be a very expensive process.
- Unfair service charges: Service charges are fees that leaseholders pay to cover the cost of maintaining the building they live in. Some service charges are high and unfair.
What changes will the Leasehold Reform Bill make?
The bill will make several changes to the leasehold system, including:
- Making it more affordable and easier to extend a lease: The standard lease extension term will increase to 990 years for houses and flats. The marriage value, which is the additional cost of extending a lease as it gets closer to expiry, will be scrapped.
- Giving leaseholders more control over service charges: Freeholders or managing agents will need to issue bills in a standardised format, making the data easier for leaseholders to assess and challenge.
- Making it easier for leaseholders to challenge landlords over unreasonable charges: Leaseholders will no longer have to pay their freeholder's costs when making a claim.
- Banning the sale of new-build leasehold houses: From 2024, all newly built houses in England and Wales will be freehold.
What can I do if I am a leaseholder?
If you are a leaseholder, you should contact your freeholder or managing agent to find out more about the charges you pay. If you are a self-managing leaseholder - consider appointing a managing agent to handle the red tape and allow you to experience hands-off management, so you can focus on the things you'd rather be doing with your time. We keep our eyes and ears to the ground for all new, upcoming and proposed legislative changes in our industry so that you don't have to.
If you are a landlord unsure about the terms of your leasehold, or if you'd like to talk more about our property management services, get in touch with our expert team today at 01482 562 562 or email our Lettings Manager, Jake ✉️