Leasehold Reform: What's the Update

Following the Government in 2017 announcing plans to to review the position relating to new builds being a leasehold rather than freehold, Leasehold Reform was introduced in the Law Commission’s 13th Programme of Law Reform. 

The Law Commission has now carried out a full review of the law and procedure in relation to enfranchisement - being the purchase of a freehold interest or extending a lease agreement - following a number of consultations on Leasehold home ownership, Leaseholder Right to Manage and a call for evidence on Commonhold. 

As part of Leasehold Reform, we saw on 30 June 2022, the enactment of the Leasehold Reform (Ground Rent) Act 2022 which seeks to set future ground rents to zero for new lease agreements.

Both Michael Gove and Rachel Maclean in 2023 have stated that further Leasehold Reform is required and on the way with future legislation looking to:

• Reform the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
• Abolish marriage value.
• Cap the treatment of ground rents at 0.1% of the freehold value and prescribe rates for the calculations at market value.
• Keep existing discounts for improvements made by leaseholders and security of tenure.
• Give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”.
• Allow for redevelopment breaks during the last 12 months of the original lease, or the last five years of each period of 90 years of the extension to continue, “subject to existing safeguards and compensation”.
• Enable leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term.

At this stage, it appears that the initial discussions around moving away from leasehold and towards commonhold have faded and that leasehold is here to stay, albeit with plans to try and make it fairer for leaseholders.