The Sunday Times reports that Michael Gove, the Levelling Up Secretary, has prepared a Leasehold Bill for inclusion in the King’s Speech.
In view of past government statements this could have important ramifications for residential leaseholders and their landlords.
In January Michael Gove announced the government’s intention to abolish the leasehold system, describing it as an “outdated feudal system that needs to go”. Previously the government had expressed an intention to scrap marriage value and to extend leases for a longer duration.
It seems that a compromise has been reached that will enable leasehold to be replaced over time rather than scrapped immediately. This implies the introduction of an uprated commonhold system.
Some years ago, the government had asked the Law Commission to review the law on enfranchisement with a view to making it simpler, quicker and more cost effective. They were also asked to provide options to reduce the price payable by leaseholders and to make recommendations around the right to manage and to reinvigorate Commonhold.
The report “Leasehold Home Ownership: buying your freehold or extending your lease” was described as a root and branch review of enfranchisement rights. Some 102 recommendations alone were made including a simplified procedure for house enfranchisement, that statutory lease extensions be for 990 years (up from the current 90 years) and to remove the two year ownership condition.
The Sunday Times article indicates that these recommendations are to be implemented and ministers intend to remove marriage value (being one of the valuation options) and go further by capping all existing ground rents at a peppercorn although this is to be subject to consultation.
This would have a major downward effect on the price payable by leaseholders. Capping ground rents would also help those leaseholders who have an onerous ground rent, which can be an issue when they come to mortgage or sell their properties.
The right to manage introduced in 2002 will reportedly be amended to apply to a greater number of buildings; this follows one of the Law Commission’s recommendations to allow buildings with up to 50% non-residential parts to benefit (up from 25%). This may mean that the government intends to implement the balance of the recommended reforms.
Leaseholders and freeholders alike will no doubt take a keen interest in the Kings Speech and the progress of any such Bill then. The consultation around capping ground rents and timing of the election may affect timing for the introduction of any legislation.
For a summary of the Law Commission’s recommendations see my following articles:
- Right to manage reforms summary - Ashleywilson.co.uk/blog/24/right-to-manage
- Enfranchisement reforms summary - Ashleywilson.co.uk/blog/23/buying-your-freehold-or-extending-your-lease
- Right to manage reforms in detail –Ashelywilson.co.uk/blog/19/law-commission-recommendations-to-reform-the-right-to-manage
- Enfranchisement reforms in detail – Ashleywilson.co.uk/blog/13/reforms-around-lease-extension-and-freehold-enfranchisement
