Campaigners on Tuesday hailed a “huge victory for Londoners” as the Government pledged leaseholder reforms, but warned there was still much more to do to make the system fair.
Ministers have long-vowed to change the controversial leasehold system, which has seen some homeowners face extortionate fees for the management of their buildings and ground rents.
The King’s speech confirmed plans to increase standard lease extension terms from 90 to 990 years, reduce lease extension payments and a ban on building new houses, but not flats, as leasehold.
Residents in some “mixed used” developments where up to half of the building is non-residential space will also gain the right to manage their properties under new laws.
This will mean an increase to the 25 per cent non-residential limit, which prevents leaseholders in buildings with a mix of homes and non-residential spaces, such as shops, hotels, offices or GP surgeries, from buying their freehold or taking over management of their building.
Cities of London and Westminster MP Nickie Aiken told the Standard that the reforms will “make a tremendous difference to Londoners” and “end a range of dodgy practices”.
She added: “The 25 per cent rule is particularly important for the capital. So many buildings have both leaseholders and a commercial element so we are going to see how that will work in practice.”
Harry Scoffin, co-founder of campaign group Commonhold Now, told the Standard that the reforms in the Leasehold and Freehold Bill “will come as a big relief” to some but the Government “must go further”.
“It is a huge victory for Londoners and our friends in the other great cities that government will change the rules on enfranchisement and Right to Manage to empower those of us in mixed-use blocks to gain control of our buildings, charges and service providers," he said.
"We know that over the years the vested interests lobbied most ferociously against this policy, presumably because that is where the big money is, having residents’ service charges subsidise the businesses running beneath the flats.
"So long as leaseholders occupy a simple 50 per cent of the floorspace in a block, they will be eligible to get into the driving seat of their homes.
“However, government can and must go further. Most London developments have big buy-to-let populations, including many uncontactable and disinterested overseas leaseholders, and will find it impossible to muster 50 per cent support to acquire the freehold or gain Right to Manage for basic resident control.
"You have to go back to 1931 to find a government in this country elected with half of the popular vote. How is it fair to have such a threshold for something as basic as homeowners appointing a managing agent to look after the most important purchase of their lives?"
Mr Scoffin added: “There is also silence on ending forfeiture, which is routinely threatened by freeholders to get leaseholders to pay up inflated service charge demands."
In one case it highlighted in the bill, someone bought a flat in 2008 with a £300 ground rent and a 10-year doubling clause, meaning the homeowner now pays £600. The homeowner was quoted £25,000 to extend the lease.
In another case, someone who purchased a new-build flat in 2020 has seen their ground rent rise from £350 to more than £450 per year.
Around 752,000 households with children and 1.48 million over-65s are leasehold homeowners, according to the Government.
Just over a fifth (22 per cent) of home sales in 2019 were leasehold, or around 238,000 transactions in total, Land Registry figures show.
A requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from the changes will be removed, so that more leaseholders can exercise their right to the security of freehold ownership or a 990-year lease extension as soon as possible.
The legislation follows the Leasehold Reform (Ground Rents) Act 2022, which put an end to ground rents for new, qualifying long residential leasehold properties in England and Wales.
Reforms to help renters were also outlined.
The Government also plans to support the 11 million private tenants and 2.3 million landlords in England through the Renters (Reform) Bill.
The legislation will include stronger powers to evict anti-social tenants.
