Still a long way to go for leasehold reform – Lucy Barber writes for EG
Lucy Barber, Head of Residential Property, writes for EG on the latest update on the Leasehold and Freehold Reform Act 2024, and comments on how complex the task of reforming the enfranchisement industry will be.
The 2024 Act was sped through legislation in the wake of Rishi Sunak calling for General Election in July, but now “serious flaws” are being highlighted, requiring additional primary legislation before they can be implemented. The Government has prioritised elements of the Act that relate to building safety measures, leaving leaseholders waiting a little (or a lot) longer for the reforms they have been anticipating. The two year rule is set to be scrapped in January 2025, although this has not been considered much of a hindrance, however all else is subject to further consultation. This includes the Act’s ban on building insurance renumeration, and the Act’s provisions on service charges and legal costs, and the valuation rates used for calculating enfranchisement premiums.
The enfranchisement industry, a sector largely on pause for years, would benefit from a prompt decision on the valuation issues within the Act, including changes to deferment rates and capitalisation rates. However, these issues will not be looked at until the “serious flaws” in the Act are fixed. Unless they simply resolve to scrap the proposals to change the valuation basis of lease extensions, the industry will continue to wait in limbo and in addition challenges to the Act have now been initiated using the Human Rights Act 1988 which may delay things further.
As well as the discourse the current Act, the Government has recommitted to publishing a new draft Leasehold and Commonhold Reform Bill in the second half of 2025. The Bill is to be focussed on reinvigoration of commonhold through a comprehensive new legal framework. This would, however, bring changes to mortgages, insurance, conveyancing, and property management. Furthermore, flat owners will be compelled under these commonhold proposals to be the owners of the building and, as such, take on the responsibilities associated under the Building Safety Act 2022, amongst other ownership duties.
“For now, the position is still uncertain, the timing is uncertain and the eventual drafting of the legislation is uncertain. Leaseholders and freeholders are in the same position they have been in for many years. There are no quick and easy answers to any of the issues that have slowed up the legislation to date; if there were we would no doubt be a lot further forward.”
Read the full article here in EG Radius.
