Almost 40% of the properties in the PRS in England are leasehold, so the chances are that if you're a private landlord listening to this podcast, you'll have at least one leasehold property in your portfolio.
If you do own a flat in England or Wales, or are thinking of buying one, you need to listen to this episode of the Good Landlording podcast.
This is because the government plans to "take steps to bring the feudal leasehold system to an end", by "reinvigorating commonhold through a comprehensive new legal framework", and replacing leasehold with commonhold. As part of this, the Government say they will ban the sale of new leasehold flats so that commonhold becomes the default tenure.
This promises have significant implications for leaseholders, should it see the light of day, and it's something that property investors need to understand.
However, abolishing "feudal" leasehold is also a lot easier said than done, and in this episode of Good Landlording, Richard and Suzanne discuss what it all means, and what's likely to happen in practice.
They also talk about the implementation of the Leasehold and Freehold Reform Act 2024, and plans to abolish forfeiture and tackle ground rent for existing leases.
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What we cover in this episodeRecap of what's in the Leasehold and Freehold Reform Act 2024What are Labour's proposals for the draft Leasehold and Commonhold Reform Bill1. Labour promises to "tackle" ground rent2. The abolition of forfeiture for leasehold properties3. Labour's promise to replace leasehold with commonholdHow does commonhold differ from leasehold?Why does the Government wish to abolish freeholdThe transition from leasehold to commonhold
Recap of what's in the Leasehold and Freehold Reform Act 2024
The Leasehold and Freehold Reform Bill managed to get onto the statute just before the election, becoming the Leasehold and Freehold Reform Act 2024.
The Leasehold and Freehold Reform Act 2024 has the following key provisions:
Considerably longer lease extensions, ie 990 years instead of 50 for houses or or 90 for flats.
A new valuation process that is more favourable to the leaseholder.
The banning the sale of new houses as leasehold, making sure that they are sold as freehold.
Changes to the valuation methods for collective enfranchisement by leaseholders.
Greater transparency over service charges and estate management charges.
At the moment the Act has only received Royal Assent, but hasn't yet come into effect. However the Government's July 2024 King's Speech says "The Government will act quickly to provide homeowners with greater rights, powers and protections over their homes by implementing the provisions of the Leasehold and Freehold Reform Act 2024".
They also say in the King's Speech that they will "will consult on the best way to bring [...] the injustice of ‘fleecehold’ private estates and unfair costs to an end [...] and implement new protections for homeowners on private estates in the Leasehold and Freehold Reform Act 2024.
It's expected that leaseholders will need to wait until 2025 or 2026 before they can exercise their rights to extend leases for up to 990 years, but the Government will be under pressure to do it as soon as possible.
What are Labour's proposals for the draft Leasehold and Commonhold Reform Bill
The King's Speech refers to publishing a draft Leasehold and Commonhold Reform Bill that will "reinvigorat[e] commonhold by modernising the legal framework". They will also "restrict the sale of new leasehold flats. The Government will consult on the best way to achieve this, so that generations to come will benefit from absolute homeownership".
The use of the word "draft" means the Bill itself is unlikely to be presented to parliament in the next year. Instead, they will publish it to enable people to comment on it as commonhold is very complex.
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