Leasehold and Freehold Reform Bill: are we there yet?

There has been extensive coverage in both the press and social media regarding the proposed contents of The Leasehold and Freehold Reform Bill.

Before we delve into the Bill’s legislative journey, let us highlight for the benefit of those currently unfamiliar some of its primary components:

• increasing the standard lease extension term from 90 years to 990 years for houses and flats, with ground rent reduced to a peppercorn
• abolishing marriage value. In short, marriage value, an additional component to a valuation calculation, is currently triggered in respect of leases that have fewer than 80 years unexpired
• removing the requirement for leaseholders to have owned their property for two years before embarking on the statutory lease extension process
• enabling leaseholders in buildings with up to 50% non-residential floor space to buy their freehold or take over its management (an increase from 25%)
• replacing buildings insurance commissions with transparent administration fees for managing agents, landlords and freeholders
• ensuring transparency regarding leaseholder’s service charges
• banning the sale of new leasehold houses   

The Bill, first announced in the King’s Speech on 7 November 2023, was published on 27 November 2023. It was then debated in Parliament by MPs for the first time on 11 December 2023 and passed its Second Reading with almost unanimous cross-party support. Passage of the Bill then proceeded to the committee stage on 16 January 2024 where it was scrutinised by the Public Bill Committee who heard both oral and written evidence from a wide range of experts in order to assess the benefits and drawbacks of the proposed changes.  

The committee stage concluded its consultation on 30 January 2024, with the report stage and Third Reading scheduled for 27 February 2024 when MPs will table, debate and vote on the contents of the proposed amendments and new clauses to the Bill. 

What happens next?

The Bill will then make its way to House of Lords, anticipated in March, where it will undoubtedly be subject to a heated debate among the Lords and undergo the same number of readings. 

Only once both echelons of the House have agreed on the final version of the Bill, will it be sent to His Majesty for royal assent following which and only then, will it become law. 

It is clear that the leaseholder will benefit significantly from the proposed reforms, particularly in respect of premiums being significantly cheaper, if marriage value is indeed abolished. However, freeholders are unlikely to let this matter pass without a challenge under the human rights legislation on the grounds that these reforms would significantly curtail the value of their investments.

Michael Gove, who sponsored the Bill, had previously stated in Parliament that in the event that freeholders mount such a challenge, he would bypass this by withdrawing from the European Convention of Human Rights. Notwithstanding that the country may turn red later this year, it remains to be seen whether Michael Gove will indeed be in a position to carry out his threat. After all, he also previously stated that he would seek to replace the outdated feudal system of leasehold ownership, which as you will see in this article, did not materialise.  

With a general election on the horizon this year, we anticipate that we may finally see the new legislation kick in before the general election, given that Michael Gove is after all determined to leave us with a parting gift.  

Laurent Vaughan is a senior associate in the property law and conveyancing team, specialising in collective enfranchisement, right of first refusal and lease extension matters, both on a statutory (Leasehold Reform Housing and Urban Development Act 1993 and Landlord & Tenant Act 1987) and on a non-statutory basis.