Leasehold Reform: What came out in the wash? - Boodle Hatfield

Your lawyers since 1722

29 May 2024

Leasehold Reform: What came out in the wash?

The announcement of the forthcoming general election came at a key point for those following the progress of leasehold reform.

At the time of the announcement, both the Leasehold and Freehold Reform Bill and the Renters Reform Bill were making their way through the House of Lords but had not yet made their way to the statute books to become law. What will the general election mean for leasehold reform and which of the two Bills made it through the “wash up period” and onto the statute books before the dissolution of Parliament?

Reprieve for the Leasehold and Freehold Reform Bill

The Leasehold and Freehold Reform Bill had been making relatively swift progress through the Parliamentary process but was still due to be subject to further scrutiny and debate at the point of the announcement of the intention to call the general election. The election announcement triggered a frantic two-day legislative “wash up period” before the dissolution of Parliament and the Leasehold and Freehold Reform Bill gained the cross party support required to made it onto the statue books on 24 May as the Leasehold and Freehold Reform Act 2024.

Whilst at the time of writing we have not yet had sight of the final consolidated Leasehold and Freehold Reform Act 2024, and notwithstanding any last minute changes agreed last week, the Leasehold and Freehold Reform Act 2024 is likely to be enacted in substantially the same form as the Bill (i.e. the form that had been due to be further scrutinised next month as part of the planned legislative process). We can therefore expect provisions making it overall cheaper and easier for tenants to extend their lease or buy their freehold once the Leasehold and Freehold Reform Act 2024 is formally implemented including the extension of the standard lease term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats), the abolition of the requirement that a leaseholder must have owned their house or flat for 2 years before they can extend their lease or buy their freehold, an increase in the threshold for the non-residential element in collective enfranchisement claims from 25% to 50% and the abolition of marriage value when valuing the freeholder’s interest on enfranchisement. However, a key and controversial objective of intended reforms, namely the abolition or capping of ground rents, which was the subject of an ongoing consultation process at the date of the election announcement, will now not be included in the Leasehold and Freehold Reform Act 2024.

The reforms set out in the Leasehold and Freehold Reform Act 2024 will not take effect until formally implemented. Implementation will be a matter for whichever party forms the Government on 4 July and, in many cases will require secondary legislation that cannot be progressed until after the election. As a result, the timing of the introduction of the reforms introduced by the Leasehold and Freehold Reform Act 2024 remains uncertain.

Abolition of the Renters Reform Bill

The Renters Reform Bill and the commitment to abolish section 21 “no fault evictions” was also a key Conservative party manifesto commitment. However, the controversial nature of the proposal, and the strength of opposition to the proposed reforms being implemented before the court system could effectively manage the new regime, led to significant delays. Unlike the Leasehold and Freehold Reform Bill, the Renters Reform Bill did not make it onto the wash list and, as a result, did not receive Royal Assent by the time that Parliament was dissolved and the Bill has, therefore, effectively been abolished.

This is, however, not necessarily the end of the road for the proposed section 21 and other renters’ reforms. The Bill had general support from both sides of the House of Commons and, whilst not likely to be a priority for a future Conservative Government, Labour’s Angela Raynor reiterated just last week (before the announcement of the general election) that a future Labour Government would “ban no fault evictions, no ifs, no buts” and leasehold reform of some form will undoubtedly therefore form a key priority of any new Labour Government.

Whichever party forms the new Government come July, any new leasehold reform will however require new primary legislation that will have to pass through the Commons and the Lords. Whilst this could, potentially, be achieved by the end of the year it will not be a straightforward process especially if, as is likely, a Labour Government looks to bring in more stringent reforms including minimum energy efficiency standards and possibly rental controls. Until such time as any new legislation is introduced and becomes law, section 21 of the Housing Act 1988 therefore remains in force and any section 21 notices served in accordance with the requirements of the 1988 Act will remain valid.