The “feudal leasehold system” will be brought to an end and commonhold will become the default tenure, the government has reiterated.
The announcement was in a statement by the Minister of State for Housing and Planning, Matthew Pennycook, who said that as part of its commitment to “finally bring the feudal leasehold system to an end in this Parliament”, it would “enact key pledges in our manifesto… such as making commonhold the default tenure.”
The Leasehold and Freehold Reform 2024 Act
The Leasehold and Freehold Reform 2024 Act was passed by the previous government just before the general election.
But Pennycook suggested that there were “serious flaws” in the act that needed to be rectified.
He said the flaws included an omission in the act that denies tens of thousands of shared ownership leaseholders the right to extend their lease with their landlord.
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Pennycook said: “This government will not make the same mistakes as the last when it comes to reforming what is, without question, an incredibly complicated area of property law.
“While we intend to continue to work at pace, we will take the time necessary to ensure the reforms we pass are fit for purpose.”
New provisions in force
The act has already seen a number of provisions come into force in the summer, including those relating to legal costs associated with the remediation of unsafe buildings, and addressing when homeowners risk losing their home due to not paying an income-supporting rentcharge after 40 days.
Further building safety measures
At the end of October, the government also introduced further building safety measures.
These mean remediation contribution orders and remediation orders – which require developers and other relevant persons to pay for or fix defects – can be made in respect of interim measures, such as waking watches and simultaneous evacuation alarms.
They also clarified that costs of alternative accommodation, when leaseholders have been displaced from their homes on building safety grounds, and expert reports, can be recovered through remediation contribution orders.
The two-year rule
The government is looking to start the act’s provision to remove the ‘two-year rule’ in January next year.
This will mean leaseholders will no longer have to wait two years after buying their property before exercising rights to extend their lease or buy their freehold.
The act includes measures that will make it cheaper for leaseholders to buy their freehold or extend their lease.
Next summer, the government is also looking to consult on the valuation rates used to calculate the cost of these enfranchisement premiums.
Unfair charges
Pennycook went on to say that the government remains committed to protecting residential freeholders on private and mixed-tenure housing estates from unfair charges.
“Next year, we will consult on implementing the act’s new consumer protection provisions for the up to 1.75 million homes that are subject to these charges, and bring these measures into force as quickly as possible thereafter.
“These include ensuring that homeowners who pay an estate management charge have better access to information they need to understand what they are paying for, the right to challenge the reasonableness at the First-tier Tribunal (in England), and to go to the tribunal to appoint a substitute manager,” he said.
The government said the act left untouched has serious problems, including unregulated and unaffordable ground rents.
In addition, it claimed these issues included the poor quality of service provided by some managing agents, the threat of forfeiture as a means of ensuring compliance with a lease agreement, and the prevalence of ‘fleecehold’ private and mixed-tenure housing estates.
New Draft Leasehold and Commonhold Reform Bill
The government’s new Draft Leasehold and Commonhold Reform Bill is expected to be published in the second half of next year.
The government also says it will publish a white paper on reforms to commonhold early next year.
Pennycook concluded: “We are determined to end the injustice of ‘fleecehold’ entirely and we will consult next year on legislative and policy options to reduce the prevalence of private estate management arrangements, which are the root cause of the problems experienced by many residential freeholders.”
