UK: Catching Up On Leasehold Reform

What's in the Bill?

If enacted, the Bill will include the following provisions:

1. Leasehold enfranchisement and the right to manage – in parts 1 and 2 of the Bill, the Government will implement some of the Law Commission's recommendations to make it cheaper and easier for leaseholders in houses and flats to extend their lease or buy their freehold. This will include increasing the standard lease extension term from 90 years to 990 years at a peppercorn rent, and removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these rights. There are also provisions to increase the 25 per cent 'non-residential' limit preventing leaseholders in buildings with a mixture of homes and other uses such as shops and offices from buying their freehold or taking over management of their buildings, and allow leaseholders in buildings with up to 50 per cent non-residential floorspace to buy their freehold or take over its management. Further discussion of some of the issues this raises for landlords can be found in our briefing on the Government's proposals on mixed-use buildings.
2. Improving leaseholders' consumer rights – Part 3 of the Bill will allow leaseholders to obtain service charge information from their landlord on request.
3. Leasehold fees and service charges – Part 3 of the Bill includes:
   
   • a requirement for transparency over leaseholders' service charges;
   • the replacement of buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees, so that leaseholders are no longer charged commissions on top of their premiums; and
   • the ending of the presumption that leaseholders will pay their landlord's legal costs in connection with a challenge over poor practice.
4. Protection for freeholders paying service charges - People who pay service charges to an estate management company currently have to rely on the terms of their contractual arrangements with the management company. The CMA is currently looking into these concerns as part of its study of the housebuilding sector. However, Part 4 of the Government's proposed Leasehold and Freehold Reform Bill would grant freehold homeowners on private and mixed tenure estates rights of redress regarding service charges, by establishing rights to transparency over their estate charges, access to support via redress schemes, and rights to challenge the charges they pay by taking a case to a Tribunal, just like existing leaseholders.
5. Extension of protections to fixed service charges – Part 3 of the Bill contains an extension of some of the service charge protections enjoyed by leaseholders who pay variable service charges to those leaseholders who pay fixed service charges.

The Bill's key provisions are as follows:

1. The abolition of the section 21 procedure for bringing a tenancy to an end without recourse to the courts, known as 'no fault' evictions. This will mean that assured shorthold tenancies will cease to exist, and will be replaced by periodic assured tenancies.
2. The introduction of new possession grounds to enable landlords to recover vacant possession if they wish to sell their property or move close family members into it, and to provide grounds for landlords to repossess properties where there has been anti-social behaviour or repeat rent arrears. Tenant groups are concerned that these grounds could be exploited by unscrupulous landlords, whereas landlords are concerned about the costs, delays and uncertainties that are the usual consequences of bringing a court action.
3. Tenants will be permitted to appeal above-market rents. The tribunal will continue to be able to determine the actual market rent of a property.
4. The introduction of a new Private Rented Sector Ombudsman which is intended to provide fair, impartial, and binding resolution to many disputes (although not matters to do with eviction) and to therefore represent a quicker, cheaper, and less adversarial solution than recourse to the court system.
5. A Privately Rented Property Portal will be set up to help landlords understand their legal obligations and demonstrate compliance, and provide better information to tenants to make informed decisions when entering into a tenancy agreement. It will also support local councils to target enforcement activity.
6. Tenants will be able to request a pet in the property, which the landlord must consider and cannot unreasonably refuse although they will be able to require pet insurance to cover any damage to their property.