Leasehold and Freehold Reform Bill receives Royal Assent

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The Leasehold and Freehold Reform Bill has been granted Royal Assent after being rushed through the House of Lords on Friday.

The bill makes it easier for leaseholders to buy out the freehold or extend their lease, while it extends the standard lease term to 990 years – from 90 for a flat and 50 for a house.

The bill scraps leaseholds on new houses but not flats, while leaseholds will be able to challenge their freeholders for poor practice via a redress scheme. Freeholders will be required to be part of the scheme.

In terms of what’s missing from the bill, it fails to cap ground rents despite that being pushed by departing housing secretary Michael Gove.

Scott Goldstein, partner at Payne Hicks Beach, said: “The act introduces a number of welcome changes” and it “continues progress towards fairer charges to leaseholders”.

Other aspects contained in the act are:

• Giving leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format
• Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
• Making it cheaper for leaseholders to exercise their enfranchisement rights as they will no longer have to pay their freeholder’s costs when making a claim.
• Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee that for home buying and selling information.
• Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.
• Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice that currently acts as a deterrent when leaseholders want to challenge their service charges.
• Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees.
• Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.
• Removing the requirement for a new leaseholder to have owned their house or flat for 2 years before they can extend their lease or buy their freehold.

Ian Fletcher, director of policy (real estate) of the British Property Federation, said: “It has left few freeholders or leaseholders satisfied.

“It has not received proper scrutiny as many Peers in the House of Lords expressed passionately this afternoon. It infringes legitimate property interests significantly.

“It doesn’t tackle some of the primary problems leaseholders face. A lot of promises have been made that have not been delivered, in some cases thankfully, because they would have caused so much damage to the leasehold system.

“There will be future leasehold reform, but hopefully it will be considered more comprehensively and more collegiately.”


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