Proposed changes to Residential Leasehold System in England

Leasehold reform. Sexy? No. Interesting? Probably not. Important? Definitely.

The leasehold property market has suffered from a deluge of adverse publicity in recent months and at last it seems that changes are coming. But what are they and how could they affect you?

The Government published a response to a 2018 Consultation, on 28^th June 2019 on proposed reforms to the residential leasehold system.

These proposed reforms include: -

1. A ban on unjustified use of new leases for houses with only limited exemptions.

2.Reducing new ground rents to a nominal level

In its response, the Government confirms it intends to legislate to limit ground rents in future long residential leases to a peppercorn (i.e. nothing) instead of the proposed cap of £10.00 per annum.

3. Service charge protections for freeholders.     

So that residential freeholders who pay an estate charge benefit from similar protections as tenants of long residential leases and equivalent rights to challenge the reasonableness of estate rent charges.      

Residential freeholders will also have the right to apply to a Tribunal to appoint a manager of their estate in a similar way that leaseholders have a right to appoint a manager to look after their building.

4. Expediting and imposing limits on charges for replies to management enquiries  from Landlords (or their agents) on the sale of a leasehold property.

Obtaining replies to leasehold enquiries from landlords and managing agents can be slow and delay sales.

In the original 2018 Consultation responses favoured setting a time limit for replies and the Government proposes a statutory deadline of 15 working days.  Also, the Government intends to set a limit of £200.00 plus VAT for the cost of producing replies to the standard enquiries (and also that the fee must be reasonable).  Updates to replies will be capped at £50.00 plus VAT.

In each case those limits may be increased in line with inflation. It appears the intention is to follow through on these reforms though at present there is no timescale for legislation. More details can be found on the Government website.

While it is not certain all or most of these reforms will become law we consider it is likely most will. So for the moment it is a case of “watch this space”.

If you would like further advice or assistance on any of the points raised above please do contact either myself, Donald Morrison, or David Hards.