The Leasehold and Freehold Reform Bill has seen a speedy passage through Parliament. There have been a mass of amendments, with some watering down and bolstering, as well as talk of it going no further.
The most recent update is the introduction of a £250 cap on existing residential ground rents for 20 years, as an amendment to the Bill. The effect of the ground rent cap will still result in a huge devaluation of freeholds and ground rent investments, despite it being a rollback from a complete ban on ground rents on a retrospective basis.
Another more recent amendment has seen the insertion of amendments to effect the ban on leasehold houses. This is planned to be by allowing only "permitted leases" to be granted in respect of houses, such as Shared Ownership leases. This process is likely to become administratively burdensome given the requirement for affected leases to contract out of the new legislation.
Some of the key objectives of the Bill remain as they were at the outset, namely 990 years in place of a 90-year lease extension, increasing the enfranchisement qualifying non-residential floorspace threshold from 25% to 50%, and removing the 2 year qualification criteria for lease extensions.
What has remained controversial and subject to much speculation are the reforms that affect value in enfranchisement claims. Whilst the abolition of marriage value, which can double the costs of a premium payable, has always been at the forefront of the proposals, there have been the first signs of re-consideration in the Lords.
This Bill has seen leaseholders and landlords alike wait with bated breath as the final form emerges. There remains a little way to go, and the resulting legislation will no doubt not please everyone, which has always been the case. It seems likely the Government will force through a Bill before the General Election.
The next question will be whether there is to be further reform should there be a change in Government. Labour had previously pledged to abolish leasehold within their first 100 days in office, however this has now been dropped although the commitment to getting rid of the system remains.
The next two months are sure to be interesting in this area. With its rush through Parliament and a mass of speculation, the legislation that finally emerges will be sure to see an explosion of claims and issues in the leasehold sector.
