Association of Leasehold Enfranchisement Practitioners (“ALEP”) Autumn Conference 2021

Last week, Pinney Talfourd attended the ALEP Autumn Conference 2021. The conference covered topics such as: Enfranchisement, Rights of First Refusal, and Lease Extensions. However, considerable time was spent discussing the future of leasehold reform, specifically, the two following arears:

Leasehold Reform (Ground Rent) Bill 2021

On 21st July 2020, the Law Commission published their report on leasehold enfranchisement: “Leasehold home ownership: buying your freehold or extending your lease”. The report made 102 recommendations, and we cover the key recommendations here.

Under the agreed protocol, the Government was meant to publish their full response to the report within 12 months. To date, no Government response has been published; although they did issue a press release in January 2021 which we cover here.

The Government has however addressed one part of the report by bringing forward a draft bill: the Leasehold Reform (Ground Rent) Bill 2021. The bill actually goes further than the title suggests, abolishing all rent in new long residential leases, with no definition of “ground rent”.

The key details of the bill are:

• restricting the charging of ground rents to a peppercorn in new long residential leases (though this does not apply to service charge reserved as rent).
• prohibiting the charging of administrative charges in relation to ground rent.
• imposing a new financial penalty of £500 to £5,000 for landlord breaches (which will be enforced by trading standards).
• allowing leaseholders to recover unlawfully charged ground rent with interest through the First-Tier Tribunal.

However, the bill:

• will apply only to future long residential leases (for leases being surrendered and re-granted, ground rent will remain payable up until the surrender and re-grant)
• only applies to leases granted for a premium (excluding long leases granted for a full rent)
• will not apply to excepted leases: business leases, community housing leases, and home finance plan leases.

The bill has completed its third reading in the House of Lords and has begun its first reading in the House of Commons. We will continue to cover the bill as it makes its way through Parliament.

Commonhold Reform

The 21st July 2020 Law Commission Report also covered the current issues facing commonhold and the proposed reforms. We cover the basics of commonhold here, and the proposed reforms here.

The Government’s intention, to have a working system of commonhold ownership, has been clear since The Commonhold and Leasehold Reform Act 2002. This intention will likely have been strengthened following the bad publicity over the leasehold “trap” which we cover here.

However, there remains a lack of interest in commonhold with fewer than 20 commonhold properties being in existence as opposed to approximately 18 million leasehold homes.

Any reform and eventual bill will still need to address considerable challenges such as:

1. generating support and understanding from key industries such as mortgage lenders, solicitors, estate agents, and developers
2. incorporating nearly 20 years of technological advances and legal developments since the 2002 bill was passed
3. dealing with potential Human Rights challenges to requiring less than 100% agreement before a conversion from leasehold to commonhold can go ahead.

Currently, there is no indication that the Government is drafting a bill to bring forward Commonhold reform and it has not even provided a formal response to the Law Commission Report. Therefore, any changes are unlikely during this session of Parliament, but overall, still appear to be coming.

What should leaseholders do?

In the face of major reform, a key question we are often asked is should leaseholders proceed with enfranchisement or lease extensions now, or wait?

This question would be simpler if the Government set out a timeframe for reform. However, in the absence of this, leaseholders must seek expert advice before making an educated decision.

How Pinney Talfourd can help

Pinney Talfourd are experts in commercial and residential property litigation and can advise you on changes to the law so you are given up to date advice.

Please do not hesitate to contact either Stephen Eccles on 01708 463202 or Oliver-James Topping on 01708 463227 should you wish to discuss anything further.   

This article was written by Oliver-James Topping, Solicitor in the Residential Property Litigation Team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of November 2021.