Leasehold reform plans move forward

In a Ministerial Statement yesterday, Secretary of State Matthew Pennycook unveiled plans for the implementation of the Leasehold & Freehold Reform Act, aiming to address longstanding issues in leasehold legislation. His statement has sparked optimism among industry experts and leaseholders.

Mark Chick, Director of the Association of Leasehold Enfranchisement Practitioners (ALEP) and Partner at Bishop & Sewell LLP, praised the announcement for providing a clearer timeframe and tangible objectives.

“ALEP welcomes the ministerial statement which puts in place a timeframe and some objectives for the implementation of the Leasehold & Freehold Reform Act,” Mark Chick said. He acknowledged the complexity of the reforms and the government’s recognition of serious flaws in current legislation, including the need for amendments to the valuation mechanism.

Among the most notable changes, the removal of the two-year rule stands out. Starting January 2024, leaseholders will no longer need to wait two years to extend their leases, a change ALEP has advocated for over 15 years. Chick described it as a “quick win” for leaseholders, significantly improving flexibility and access to enfranchisement rights.

Other critical developments include the promise to implement amendments to Right to Manage (RTM) legislation in 2025 and a consultation on valuation rates next summer. However, issues remain, such as the ineligibility of shared ownership properties for 990-year lease extensions and challenges related to voting rights in RTM companies.

The 2024 Act’s framework has faced criticism for its rushed passage during the previous Parliament. According to Mark Chick, “It is unfortunate that the 2024 Act was rushed through... the legislation is not entirely fit for purpose. More corrective work will need to be done.”

The government has also reaffirmed its commitment to advancing a Leasehold & Commonhold Reform Bill within the current parliamentary session, with a White Paper on commonhold reforms anticipated early next year.

The Council for Licensed Conveyancers (CLC) has welcomed these steps, particularly the proposed regulation of property managing agents. “Professionalisation of managing agents can contribute very significantly to transforming home buying and selling,” a CLC representative said, referencing the anticipated consultation on regulating property agents in 2025.

While the reforms are a step forward, Mark Chick noted that significant complexities remain, particularly around introducing widespread commonhold. He emphasised that the announcement, though not exhaustive, is “a positive step forward” that offers much-needed clarity for those affected by uncertainty in the property market.

With reforms slated to unfold gradually, the government’s plan acknowledges the challenges ahead while signaling its intent to address critical gaps in the current leasehold system.