The draft reforms in the Leasehold and Commonhold Reform Bill have finally been published. There is good news for leaseholders, especially regarding ground rents.
The draft Bill, which is over 350 pages long, can be viewed here. Here’s our quick summary of some of the main points for owners of leasehold properties.
Ground rents capped at £250 a year
Ground rents were abolished for most new residential leasehold properties in England and Wales in 2022 but remained for approximately 3.8 million existing leasehold properties. For those leaseholders who are paying ground rents to freeholders, the Bill proposes that ground rents will be capped at £250 a year, then fall to a “peppercorn” rate – effectively zero – after 40 years.
This should not only reduce ongoing costs but also rectify the position for leaseholders whose leases currently contain high ground rent provisions, making it easier for them to sell or obtain a mortgage for their property.
The government has also said it will scrap something called “forfeiture”, a process that allows freeholders to start court action to seize someone’s property if they have a service charge debt of more than £350. This will be replaced by a new court-led process “with strict safeguards for more extreme cases”.
Ban on the sale of new leasehold flats
The reforms also include proposals to ban the sale of new leasehold flats, and developers will no longer be allowed to sell new flats as leasehold. Instead, new flats will be sold as commonhold – where neighbours collectively own the ground their flats are built on as well as the building itself.
Making it easier for leaseholders to convert to commonhold
The Bill also seeks to implement proposed changes to reinvigorate the commonhold system, which was first introduced in 2002 but has seen slow take-up. Under commonhold, flat owners are also part-owners of the common areas of the property, giving them greater control over the costs of running their building.
How our leasehold property experts can help
The bill will now be reviewed by the Housing Committee before making its way through Parliament, and if everything goes smoothly, it is expected to come into force in late 2028. We’ll keep you updated as things progress.
If you own a leasehold property, or are looking to buy one, we can give you practical legal advice. Please contact:
- Frances Watts on T: 0118 920 9499 for enquiries relating to lease extensions
- our conveyancing team for a quote for buying or selling a property on Reading T: 0118 975 6622 or Henley T: 01491 570 900 or email residentialproperty@thpsolicitors.co.uk
- or complete our website form below with your details, and we will get back to you.