The government has published the Commonhold and Leasehold Reform Bill in draft form for pre-legislative scrutiny by the Housing, Communities and Local Government Select Committee.
The draft Bill introduces a new legal framework for commonhold, reflecting most of the recommendations made by the Law Commission in its 2020 report. It would allow commonhold to be used more widely and includes measures to make it easier for existing leaseholders to convert, if they choose to do so.
The Bill also proposes banning the use of leasehold for new flats. Subject to limited exceptions, new flats would be required to be sold as commonhold. Alongside this, the government has launched a consultation, Moving to Commonhold, seeking views on how the ban should be implemented.
The draft legislation includes provisions to abolish the current forfeiture system, under which landlords can seek possession of a property for breaches of lease terms. This would be replaced with a court-led process, with safeguards in place. Similar enforcement powers linked to estate rent charges on freehold estates would also be removed.
In addition, the Bill proposes capping existing ground rents at £250 per year, with these charges reducing to a peppercorn after 40 years.
RICS CEO, Justin Young, commented: “The announcement offers greater certainty and clarity on the Government’s proposed reforms to the leasehold system, including long-awaited action on ground rents. The publication of the draft Commonhold and Leasehold Reform Bill is a critical step in this process. RICS looks forward to working with members, MHCLG, and other key stakeholders to deliver the best outcomes for consumers and the market.”
Tom Goodman, managing director of Goodlord Platform, said: “The capping of ground rents will be welcomed by landlords who own leasehold properties at a time when they are facing rising costs across the board. Escalating ground rents penalised this class of landlord and created an additional incentive for them to sell up – something the market can ill-afford against the current backdrop of supply and demand challenges.
“The PRS desperately needs more regulatory measures that support landlords to stay in the market, meaning this is a well-time reprieve for certain landlords and hopefully contributes to a market environment in which it makes financial sense for them to continue operating.”
Martin Boyd, chair of the Leasehold Advisory Service (LEASE), believes the Draft Commonhold and Leasehold Reform Bill marks a “significant milestone” for leaseholders and the “beginning of the end for the leasehold system as we know it”.
He explained: “The draft Bill tackles some of the most damaging features of leasehold, including high and escalating ground rents and the threat of forfeiture, which has left some leaseholders at risk of losing their homes over relatively small debts.
“More fundamentally, the Bill signals a decisive shift away from leasehold as the default form of home ownership. Moving towards commonhold, and making it easier for existing buildings to convert where leaseholders choose to do so, has the potential to give homeowners genuine control, security and long-term certainty over their homes. This draft legislation represents a significant step towards a fairer and more transparent system of home ownership.”
Andrew Bulmer, Chief Executive of The Property Institute, welcomes the publication of the Draft Commonhold and Leasehold Reform Bill.
“[The Bill] will give homeowners more control of the estates and communities they live in and reduce high and escalating ground rent costs for many leaseholders. These are important steps forward in improving the lives of homeowners in England and Wales.
“Commonhold will bring new responsibilities for homeowners, including building safety, financial governance, and upkeep of shared areas. Our members regularly work with residents who manage their own buildings – two thirds of the buildings TPI members manage are resident-controlled. We embrace the move to commonhold and stand ready to support future generations of commonholders to live in safe, well-managed homes.
“It is vital that commonholders, as well as leaseholders, can rely on a professional and regulated property management sector to support them. We want to see Government also deliver on its commitment to mandatory qualifications, and to bring forth regulation of managing agents, to further improve outcomes for homeowners.
“Some of these reforms will be complex, and there will be important details to scrutinise, for example, on a replacement for forfeiture, to ensure buildings with arrears can continue to function. It is very positive that the Select Committee will first scrutinise a draft of the Bill with all stakeholders.
“For our members, these reforms will bring change as the sector adapts to commonhold, although most of our members already work directly for residents – more than half of the buildings they managed are resident owned-or controlled. The Property Institute is already developing guidance and qualification modules to support our members and will continue to engage with Government to ensure the new measure in the Bill are proportionate and practicable.”
But while some industry professionals welcome the new bill, others are sceptical and believe it does not go far enough.
Amber Krishnan-Bird, a leasehold lawyer at Osbornes Law, said: “At first glance, this Bill is the leasehold revolution homeowners have been waiting decades for after years of misery under a broken system. Yet, dig a little deeper and it offers far less relief than many had hoped.
“For some these proposed changes will come as a huge relief but for others they do not go far enough. The government’s focus appears to be fully on commonhold and providing a new system rather than making any changes to the existing freehold/leasehold system, other than capping existing ground rent, which many freeholders and leaseholders are still likely to have for many years to come.
“The government says the ground rent cap may not being enforced until 2028 at the earliest and gives no timeframe for the rest of the legislation. In the interim many leaseholders will still be left be left facing difficult decisions over extending leases that are running out.”
