In January this year, we summarised the Government’s consultation: Reforming the leasehold and commonhold systems in England and Wales on our Essential Residential hub. This consultation closed on 22 February 2022 and sought views on recommendations made by the Law Commission in its July 2020 reports on commonhold, enfranchisement and right to manage. For more details of that consultation, please see our insight: The changing landscape: Government consultation on reforming the leasehold and commonhold systems in England and Wales. The Government's response to that consultation is awaited.
Since then, information and timelines on the Government proposals have been relatively thin on the ground. There was no comment in the main Queen’s Speech in May 2022 about leasehold reform. The background briefing notes stated that the Leasehold Reform (Ground Rent) Act 2022 (introduced on 30 June 2022 and which reduced ground rents in most new long residential leases after that date to a peppercorn) was the first part of the Government’s programme “to implement leasehold and commonhold reform in this Parliament”. The background briefing suggests that the Government is committed to “making it easier and cheaper” for leaseholders to extend their lease or buy their freehold and also to deliver “a reformed commonhold system as an alternative to leasehold ownership”.
In June this year, the Association of Leasehold and Enfranchisement Practitioners (“ALEP”) reported that it had written to Lord Greenhalgh to clarify the Government’s plans and received a letter in response. Lord Greenhalgh, reiterated that the Leasehold Reform (Ground Rent) Act 2022 is “the first part of our major two-part leasehold reform within this Parliament”.
Lord Greenhalgh’s response indicates that the Government’s intention remains to reform leasehold ownership. In particular, the Government plans to reduce the cost of extending a lease or purchasing the freehold of a flat or house under the relevant statutory scheme. However, further details are awaited to flesh out exactly what the Government’s proposals will look like. Previous indicators have suggested that the Government intends to significantly reduce premiums by adopting Scheme 1 from the Law Commission’s proposals on valuation for statutory lease extensions and freehold purchasers. However, there was a menu of options and sub-options set out in the Law Commission’s report and it remains unclear precisely what valuation methodology will be adopted or how calculation rates will be set. Until this information is published, it is impossible to understand precisely how premiums will be affected by the Government’s plans and therefore the full impact on landlords and leaseholders.
In July, Lord Greenhalgh resigned from his post as the Minister for Building Safety and Fire and there have, of course, been some significant political changes during this period. Government and Parliament are now on summer recess.
Stakeholders in the residential arena will no doubt be keen to fully assess the impact of the Government's proposals and will note that Lord Greenhalgh's response to ALEP suggests that there could be further developments later this year. Until then, there is little that landlords, leaseholders or others can do to prepare for potential changes because the Government has yet to fully respond to the Law Commission's reports on enfranchisement, commonhold and right to manage and the devil will very much be in the detail as to the Government's plans. However, it is clear that leasehold reform and a move to commonhold remain firmly on the Government's agenda.