In a series of tweets, housing minister Matthew Pennycook explained why there were delays in reforming the leasehold system and said some measures in the previous government’s Leasehold and Freehold Reform Act needed correcting.
Pennycook said existing leaseholders had contacted the government for clarity on when it would become easier and cheaper to extend a lease or buy a freehold.
The Conservatives’ Leasehold and Freehold Reform Act was one of the last bills to pass before the last general election, with measures to make leasehold enfranchisement simpler.
Pennycook said this included a new method of calculating the price of a statutory lease extension or freehold acquisition, or valuation process. This included the removal of the need for marriage value to be paid, a cap on the treatment of ground rents in valuations at 0.1% of the freehold value, and allowing the government to prescribe the rates used to calculate the enfranchisement premium.
He said the High Court dismissed challenges brought against the act by claimants who were freeholders and people who had reversionary interests in leases.
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Pennycook said the government was now preparing a consultation to determine what valuation rates should be used, to be published in the coming months.
“The rates will ultimately be set by the Secretary of State in secondary legislation,” he added.
However, he said even once this had been established, the government would still not be able to proceed with enfranchisement provisions laid out in the act until a “small number of specific flaws” had been rectified.
These include a loophole that means the Leasehold and Freehold Reform Act “goes far beyond the intended reforms to valuation and that undermines the integrity of the amended scheme”, adding that it was “regrettable” that the government knew of the flaws when the act passed.
Pennycook added: “It is also why this government is balancing speed with care as we enact reforms and why we’ve asked the Select Committee to subject our [Commonhold and Leasehold Reform] Bill to enhanced pre-legislative scrutiny.
“The specific flaws in the 2024 Act must be fixed through primary legislation. For obvious reasons, my firm preference is to rectify them in the final Commonhold and Leasehold Reform Bill.”
He said once these had been fixed, the government would go forward with the enfranchisement provisions in the 2024 act.
“While it is important that we take the time to ensure that reforms are watertight, I appreciate fully the need to act as quickly as we can to provide relief for leaseholders across the country, particularly those with leases approaching 80 years,” Pennycook said.
The Labour government’s Commonhold and Leasehold Reform Bill seeks to ban the sale of new leasehold flats and make commonhold the default tenure, along with plans to cap ground rent at £250 per year.
