When will the Labour government reform the leasehold system?

Property owners stuck in leasehold homes are facing a longer wait for reforms.

It has been six months since the Leasehold and Freehold Reform Act was rushed through Parliament in May before the general election and while the new Labour government promised to finish off and fill gaps left in leasehold reforms in the King’s Speech, many changes are now facing delays.

Housing minister Matthew Pennycook last week set out a timetable for further leasehold reform, warning that extra consultations and secondary legislation was required.

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He said: “We must balance speed with care if we are to ensure that the measures brought into force are to the lasting benefit of leaseholders and residential freeholders.”

Pennycook warned that the current legislation includes “serious flaws” such as on how leases are valued when assessing extending the term, while shared ownership homeowners are currently excluded.

“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,” Pennycook said.

“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.”

Labour's leasehold reforms

The King’s Speech following the general election included a Draft Leasehold and Commonhold Reform Bill that promised to “bring the feudal system of leasehold to an end.”

Pennycook has set out a timetable for removing the two-year rule, which was the time period homeowners previously had to wait to extend their lease or buy their freehold. It will be scrapped in January.

From spring 2025, leaseholders won’t have to pay freeholder legal costs when taking over management of a building.

But there is no end in sight for homeowners in hard-to-sell or remortgage leasehold homes as the government is set to launch more consultations and issue secondary legislation in the coming months to complete other reforms.

A consultation has been promised on banning buildings insurance such as commissions for landlords, property managing agents and freeholders from being paid through the service charge. It would be replaced with transparent and fair fees, Pennycook said.

There will be another consultation on service charges and on legal costs, making it easier for leaseholders to challenge charges.

The government has also promised to change how valuation rates are charged for homeowners buying a freehold or extending a lease – known as enfranchisement – but this will also be subject to consultation and will need secondary legislation.

A fourth consultation aims to protect residential freeholders on private and mixed-tenure housing estates from unfair charges.

If that isn’t enough, there will be a fifth consultation on banning new leasehold flats and engagement on how to concert existing ones to commonhold.

The Draft Bill will also tackle unregulated and unaffordable ground rents and there will be a consultation on reforming how leaseholders pay for large bills on major work to a property.

The government has also committed to a consultation on regulating managing agents.

'A missed opportunity'

While indications of a timetable are welcome, leasehold reform campaigners are not happy about the delays.

Linz Darlington, managing director of lease extension firm Homehold says that government has missed out on a “golden” change to reform the system,

“It is estimated that hundreds of thousands of leaseholders are waiting for this legislation to be turned on and make good on its promise to make it 'cheaper and easier' for them to extend their lease,” says Darlington.

“In the meantime, many of these homeowners will be stuck in properties that they cannot sell or remortgage.

“The government is missing a golden opportunity to put into force the other easier to implement benefits at the same time, such as allowing longer lease extensions to 990 years and removing the requirement for the leaseholder to pay the freeholder’s legal and valuation costs when doing a lease extension.”

Darlington suggests the delay may be in part because seven groups of freeholders have launched legal proceedings against the government on the basis that these reforms will infringe their human rights.

“Leaseholders do not want further delay,” adds Darlington.

“The government should immediately implement those parts of the legislation that do not need further work or consultation, and consult immediately on those which do.”

The National Leasehold Campaign said it was disappointing that more consultation is needed, especially on extension valuations, adding: “Now we have an official government timeline to follow, leaseholders will not forgive further delays or watering down of the Law Commission recommendations- failure to deliver is not an option. This government will be judged on their actions not their words.”