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Residential Leasehold Reform - Change Is Coming

on Monday, 06 June 2022.

Amid mounting pressure on the Government to address longstanding concerns about the way in which residential leaseholds are governed, many proposed legislative interventions were introduced in the Queen's speech on 10 May 2022, with further change likely.

Abolition of 'No-Fault Evictions'

Perhaps the most eye-catching announcement is the proposed scrapping of the section 21 Housing Act 1988 notice procedure, which allows landlords to bring assured shorthold tenancies to an end upon the provision of adequate notice at the end of a fixed term tenancy or during a periodic tenancy.

Plans to scrap section 21 evictions have been in place since 2019 and are seen to be a part of the Government's 'levelling up' agenda. A white paper is due soon which will contain more detail on the proposals, but they are expected to include the creation of a new property portal which will be designed to assist landlords in understanding their obligations, as well as providing information to tenants on their landlords' performance history.

It is understood that, as a counter to the abolition of the section 21 notice procedure, the section 8 notice procedure may be strengthened and notice periods shortened for circumstances in which the tenant is allegedly at fault.

At the time of writing, there is no indication of when these proposed changes will be introduced.

Changes to Ground Rent Charges

The Leasehold Reform (Ground Rent) Act 2022 will come into force on 30 June 2022, which all but abolishes the practice of ground rent being charged for new long leasehold interests, and lease extension where the existing lease is surrendered and regranted. There are a number of limited exclusions to the Act.

Fines of up to £30,000 can be levied by the Trading Standards Authority against freeholders who charge ground rent in contravention of the Act.

The fact that the Act will not apply retrospectively will be of little comfort to current leaseholders who are subject to punitive ground rent increases, which the Act was designed to stamp out. As a result, existing leasehold interests subject to the old regime will be less attractive to potential purchasers.

Proposed Amendments to the Lease Extension Regime

Excluded from the Queen's speech were a raft of other proposals for leasehold reform, which will presumably be legislated on in future parliamentary sessions. These include proposals to make it easier and cheaper for residential long leaseholders to extend their leases. We understand that the proposed changes to the current regime will include a reformation of the basis for valuing the cost of the extension, the abolition of marriage values, and an automatic right for long leaseholders to extend their lease by 990 years at zero ground rent.

While these changes will be welcomed by leaseholders, it is currently unclear when the proposed changes will be introduced.

For more information on the residential leasehold reform, please contact Jack Beeston in our Commercial Property team on 020 7665 0967 or complete the form below.

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