Leasehold and Freehold Reform Act Replaces Certainty with Uncertainty
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“This Act leaves more uncertainty than certainty,” said a member of Association of Leasehold Enfranchisement Practitioners(ALEP) in a recent member poll on the effectiveness of the legislation.
Initially announced in last November’s King’s Speech and concluded in the pre-election ‘wash-up’ of parliamentary Bills, the Leasehold and Freehold Reform Bill was rushed through Parliament with unusual speed.
The Leasehold and Freehold Reform Act 2024 was the last Act passed in the final session of this parliament on 24 May 2024. The Act is on the statute books, but its provisions are not yet in force. Immediately following the Act being passed into law, ALEP polled its members on whether the new Leasehold and Freehold Reform Act would have benefited from more time under parliamentary scrutiny. In response, 94% stated that more time would have been beneficial, with only 6% believing that it had received a satisfactory level of scrutiny.
Furthermore, 60% agreed that the inadequacies in the Act are such that it is necessary for the next government to put forward a further Leasehold Bill. Others (40%) felt that it was ‘too early to say’ but no members felt that leasehold reform had been satisfactorily addressed through legislation.
Mark Chick, a director of ALEP commented, “Whether a second Bill is imminent will be dependent on the choice that the country makes on 4 July. The Leasehold and Freehold Reform Act 2024 marks a determined commitment in the dying breaths of this last session of parliament for the Conservative government to honour some manifesto commitments – notably, the banning of leasehold houses and the ‘abolition’ of marriage value. Whilst the 2024 Act is now on the statute books, none of its main provisions as regards enfranchisement are yet in force and it will take secondary legislation (as the Act itself envisages) to bring many of these into effect. Many of those affected will want some guidance on the likely timelines for this and it is very difficult at this stage to hazard a guess as to when this may be. Bringing the Act to life will be a challenge for the new government (of whatever political hue). It is quite likely that some of the proposed reforms, such as the abolition of the ‘two-year rule’ and the restriction on claims being brought within a year of withdrawal along with the proposed changes in relation to landlords’ costs might well make it into force sooner than some of the proposed valuation reforms which will need more detailed regulations to bring them into effect. However, we will have to ‘wait and see’ what the Thursday brings before being able to speculate further.”
In its manifesto, the Conservative Party promises to “complete the process of leasehold reform including capping ground rents at £250 and reducing them to peppercorn over time”; whereas the Labour Party promises to, “Act where the Conservatives have failed and finally bring the feudal leasehold system to an end”. Labour promises to enact the package of Law Commission proposals on leasehold enfranchisement, right to manage and commonhold, to ban new leasehold flats and make commonhold is the default tenure.
The government not having sought to implement the fuller extent of the Law Commission’s recommendations was identified by some ALEP members as a significant omission on the basis that there is wider scope for reform of the law in the enfranchisement sector. Members recognise that parliamentary time is limited and that if and when this area of the law gets parliament’s attention that the opportunity for change should not be squandered. There was also wide-spread concern that failure to address the freeholders’ rights could result in Human Rights challenges.
Members felt that the issue of deferment and capitalisation rates was outstanding: in the words of one, “Creating a difficult period of limbo for tenants and landlords alike”.
ALEP members are also concerned about the state of ‘limbo’ that now exists between the Leasehold and Freehold Reform Act entering the Statute Book and its taking effect. One member commented, “It is unsatisfactory that the Act has received Royal Assent… [but yet] It is still very unclear if/when the various sections of the Act relating to leasehold enfranchisement will actually come into force.”
Lack of certainty over deferment rates and the prescription of rates are similarly problematic.
Mark Chick concludes, “Our members are not unanimous in their keenness for the Law Commission’s 841 page report with its 102 recommendations to be acted upon in full, but the vast majority, myself included, see potential for further reform.
“Regardless of the outcome of the general election, we hope to work with the government to achieve a satisfactory outcome for leaseholders and freeholders alike.”
