On the 7th November, The King’s Speech will be held to announce the Government’s plans for 2024. It is being reported that further leasehold reform is going to be outlined, so what will this mean for property owners?
In the summer of 2022, ground rent was effectively abolished for most new leases. However, most existing leaseholders are still compelled to pay it. As part of the Leasehold Reform (Ground Rent) Act 2022, ground rent has been abolished for new leases of flats and houses in both England and Wales. This change was welcome news, but many agree it was not far reaching enough.
Why is Leasehold reform needed?
Unlike a freehold property, a leaseholder does not own the land upon which their property stands. In place of this, the owner has a lease which gives them the right to use the property. This means the leaseholder must obtain consent to make any change to the home and must often pay ground rent.
The Leasehold system has, for some time, been in need of an overhaul. The Housing Department estimates approximates that there are currently 5 million leasehold homes in England—70% of which are flats.
New-build homes being sold has leaseholds has also fallen from a high of 15% back in 2016, down to 1% in December 2022.
Earlier this year, the Government pledged to end leasehold, calling it “feudal”. However, the plans were unfortunately dropped. So, many property owners will be hopeful to hear of potential reform in the King’s Speech.
What will the reform look like?
Now, there is suggestion of a gradual phasing out of the Leasehold system with part of the Leasehold Bill. The Bill is likely to include provision that all new houses across England and Wales will have to be freehold property. However, new flats are not going to be included.
It is expected that the new reforms will also enable leaseholders to challenge any “unreasonable charges”. Ultimately, this will make it easier for people to extend their lease.
Furthermore, it is anticipated that the statutory right to extend your existing lease will be increased from 90 years to 990 years. As well as this, the two year resident requirement before requesting an extension will be removed.
Ministers also want to cap existing ground rents that could possibly be brought before Parliament before Christmas.
When could the plans begin?
The Secretary of State has made it clear that the Government will bring forward legislation to protect leaseholders as soon as possible. This should include the right to obtain more information in respect of service charge costs. Also, to ensure that property owners are not subject to any unjustified legal costs.
The promise of reform brings hope of change to an outdated system. The proposed changes will most likely be welcomed with open arms by property owners throughout England and Wales.
We will find out exactly what the plans will entail after the King’s Speech is shared on Tuesday 7th November. Coodes will be tuning in to ensure we’re kept up to date on potential changes in legislation so we can best advise our clients.