It is a significant piece of legislation, and while the final iteration of the Act has attracted criticism for what it doesn't do, it will still have wide-ranging ramifications for our leasehold and freehold system of tenure.
The Bill was introduced by the previous Conservative government to deliver on that government’s manifesto commitments to make it cheaper and easier for more leaseholders to extend their lease, buy their freehold, take over management of their building, and buy out their ground rent.
It is difficult to summarise such an extensive piece of legislation, but the key takeaways are:
In order to buy out their ground rent however, the tenant will need to pay the “required premium”, which in summary will equate to the value of the landlord's right to receive ground rent over the remaining term of the lease (and which could be prohibitively expensive in practice).
These are just a few key examples of the proposed changes, but what are the implications for you?
Firstly, if you own leasehold property and are affected by some of the issues outlined, it would be wise to review your lease and consider whether you want to extend the term, buy out your ground rent, or perhaps seek to acquire the freehold. You would be in a more favourable position to do so going forward;
On the other hand, if you are a landlord or a developer and deal with leasehold disposals regularly then it may be wise to review your standard form lease and the terms on which your leases are usually granted. Could these amendments lead to a general trend in the market of granting longer term, 999 year leases, for example?
As a landlord to residential leaseholders, it will be important to understand your obligations introduced by this legislation so you don't fall foul of the requirements if you are faced with a leaseholder seeking to enforce any new rights.
It's also worth noting that in many instances, landlords will no longer be able to recover their costs from leaseholders when they make such requests, so these costs will be borne by freeholders and landlords.
Despite the extensive amendments introduced by the Act, there were many who argued that the changes did not go nearly far enough.
Labour have pledged to abolish leasehold flats, and have said that they will "take further steps to ban new leasehold flats and ensure commonhold is the default tenure" going forward. Commonhold was introduced almost 20 years ago but has seen little appetite or uptake in the market, so while there are viable alternatives to leasehold in existence, implementing an alternative structure will need careful consideration and support.
And what of ground rent? One criticism of the Bill is that it was silent on ground rent under existing leases, despite prior suggestions from the Government that they would cap or remove all ground rents.
It remains to be seen what steps the new Labour Government will take, but the future of leasehold reform is far from over.