This reform, echoing the promises and policies of the previous government, signifies a comprehensive overhaul intended to address longstanding issues within the property market. But further legislation could be a mixed blessing for leaseholders. 

 

Implementing existing legislation vs pushing further

Labour has vowed to put into action the Conservative government’s recently passed legislation. However, Labour’s ambitions extend further.

They plan to overhaul the leasehold system and have pledged to introduce a Leasehold and Commonhold Reform Bill in the next parliamentary session. This bill aims to limit new leasehold properties and revitalise commonhold arrangements. 

It’s promising to see the government acknowledge the need to tackle leaseholders’ concerns, such as rising service charges and the lack of a ground rent cap. Labour’s briefing emphasised the significant burden ground rents place on leaseholders.

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With the government estimating 86% of leaseholders pay an average of nearly £300 annually, these escalating ground rent contracts can become unaffordable. And it can make selling the property harder too. 

Whilst this recognition is generally positive for leaseholders, for those seeking to extend their leases or purchase their freeholds, additional legislation could bring both positives and negatives. Leaseholders need the Labour government to focus on implementing the previous Parliament’s Leasehold and Freehold Reform Act 2024. 

Although imperfect, this act has the potential to reduce costs for some leaseholders looking to extend their leases. However, it currently offers no benefits because it has not yet been enacted. To activate many provisions of the 2024 legislation, further work is needed on the existing law, not least of all hammering down a clear implementation process. 

 

Releasing leaseholders from restrictive conditions 

Many leaseholders are stuck with properties they cannot sell or mortgage due to short leases. These individuals need the Labour government to prioritise implementing the 2024 legislation before moving on to new initiatives. 

The new draft bill could easily divert attention from enforcing the existing law. And it may be that the government views investing in the current implementation process as futile, if its new bill overhauls much of the old legislation.

The term “draft” in the new bill’s title may also allude to the long timeline of this new bill, as it’s not commonly included in most proposed legislation titles. Additionally, Labour’s abandoned pledge to abolish leasehold within the first 100 days of government, even before their landslide victory, suggests this new legislation may not pass in this parliamentary session, leaving leaseholders waiting years for its benefits. 

In the briefing note for the King’s Speech, Labour promised to “act quickly,” and leaseholders certainly need them to implement the existing legislation without delay.

Regardless of how new legal frameworks develop, it is crucial for homeowners to stay informed and seek professional advice to navigate the evolving landscape of leasehold and freehold reform. The lack of clear implementation has created uncertainty for leaseholders, complicating ongoing or planned lease extensions.

The housing sector must be prepared to support leaseholders, offering them guidance and clarity as we all adapt to these changes.