Leasehold Reform Is Far From Over, Whoever Wins on July 4

Leasehold reform still has a long way to run, according to the Association of Leasehold Enfranchisement Practitioners (ALEP).

The major party manifestos made reference to the reform process, with the Conservatives saying: “We will complete the process of leasehold reform, to improve the lives of over four million leaseholders. We will cap ground rents at £250, reducing them to peppercorn over time. We will end the misuse of forfeiture so leaseholders don’t lose their property and capital unfairly and make it easier to take up commonhold.”

The Liberal Democrats made feeling reference in their manifesto, with the commitment: “Abolishing residential leaseholds and capping ground rents to a nominal fee, so that everyone has control over their property.”

And Labour’s policy document states: “For far too many leaseholders, the reality of home ownership falls woefully short of the dream they were promised. Labour will act where the Conservatives have failed and finally bring the feudal leasehold system to an end. We will enact the package of Law Commission proposals on leasehold enfranchisement, right to manage and commonhold. We will take further steps to ban new leasehold flats and ensure commonhold is the default tenure. We will tackle unregulated and unaffordable ground rent charges. We will act to bring the injustice of ‘fleecehold’ private housing estates and unfair maintenance costs to an end.” 

Association director Mark Chick, who is also a partner at Bishop & Sewell LLP, says that the Conservatives’ commitment to cap all ground rents at £250 and to phase them out over 20 years, potentially puts the ‘writing on the wall’ for ground rents in the mid to longer term, while he assumes the Labour Party’s statement suggests a similar approach, as does the Lib Dem pledge.

“The prospect of a complete ban on all ground rents may not be possible for reasons connected to the possibility of a human rights challenge and we clearly wait to see what the next government will do with the outcomes of the ground rent consultation that the Department of Levelling Up, Housing and Communities ran in December 2023. We would like to see this published.

“At this stage we don’t know exactly what a future government might look to do on the question of ground rents the policy objectives that can be gleaned from the manifestos clearly indicate the suggestion of capping them at the very least.

“ALEP members did not favour an outright ban on ground rents when surveyed in the early part of this year – and as we have said before the suggestion of a cap rather than an outright ban might be seen as a victory for common sense. For those looking to achieve a ban on ground rents under existing leases this is more likely to be resistant to a challenge on human rights grounds. 

“Also, the impact on the property market of a phased-in cap and eventual ban or ‘sunset’ clause will allow some time for adjustment. What we don’t know at this stage is what the appetite of some freeholders may be to challenge these leasehold reforms together with the proposed valuation changes that the Leasehold and Freehold Reform Act 2024 will bring in. This can only really be assessed once the relevant compensation rates in the new valuation methods in the new Act have been set.”