Leasehold Reform- What we know from the King’s Speech & Consultation on Ground Rents

Leasehold Reform- What we know from the King’s Speech & Consultation on Ground Rents

It was announced in the King’s Speech that there would be “a bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold and tackling the exploitation of millions of homeowners through punitive service charges.” This has been named as the Leasehold and Freehold Reform Bill.

In reality, this means:

• The statutory lease extension term will increase from 90 years to 990 years with the ground rent reduced to zero. In the much longer term this will eventually eliminate “marriage value.”
• The requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes will be removed.
• The 25 per cent ‘non-residential’ limit preventing leaseholders in buildings with a mixture of homes and other uses such as shops and offices, from buying their freehold or taking over management of their will be increased to 50%.
• The Creation of new Leasehold houses is banned, so all new houses will be Freehold from the outset.

There is nothing new here and these announcements were mostly expected. There is no explicit mention of the removal of Marriage Value as part of the valuation of premiums.

None of the above is law yet and as ever, it will likely take considerable time to get a bill through Parliament. Watch this space...

In relation to the capping of existing Ground Rents, a consultation has already begun which seeks views on the following:

• the full range of problems that existing ground rents can cause for leaseholders, and the scale of these problems  
• which option to cap ground rents respondents believe is the right one to deliver our aim of giving leaseholders a fairer deal
• whether there should be a period of delay before implementing any cap, and 
• the types of leases which need to be exempted from any cap to ground rents  

Some of the proposals are shown below:

• capping ground rent at a peppercorn (zero financial value)
• capping ground rent at an absolute maximum value
• capping ground rent at a percentage of the property value
• capping ground rent at the original amount it was when the lease was granted
• freezing ground rents at current levels

We would urge Freeholders and Leaseholders to respond to the consultation on Ground Rents and to get your views heard. This can be done by following the link below:

https://www.gov.uk/government/consultations/modern-leasehold-restricting-ground-rent-for-existing-leases/modern-leasehold-restricting-ground-rent-for-existing-leases

The Briefing Notes from the King’s Speech can be found here:

https://www.gov.uk/government/publications/the-kings-speech-2023-background-briefing-notes

Henry Adams have a team of Chartered Surveyors and RICS Registered Valuers based in Chichester that work closely with our network of offices across Sussex, Surrey and Hampshire to provide unrivalled professional advice based on sound local knowledge. Please do not hesitate to get in touch with Henry Adams should you wish to discuss the above proposals and how they may impact on you.