BPF: Leasehold Reform Act will be ‘one of the least celebrated laws ever’

The British Property Federation has criticised the Leasehold and Freehold Reform Act, which achieved royal assent last Friday (24 May). The Act will increase the standard lease extension term from 90 years to 990 years for both houses and flats, and the requirement for leaseholders to have owned the property for two years before they can apply to buy or extend their lease will be removed. Ian Fletcher, director of policy in real estate of the British Property Federation (pictured), said: “The Leasehold and Freehold Reform Act will possibly be one of the least celebrated laws ever. It has left few freeholders or leaseholders satisfied. It has not received proper scrutiny, as many peers in the House of Lords expressed passionately this afternoon. “It infringes legitimate property interests significantly. It doesn’t tackle some of the primary problems leaseholders face. A lot of promises have been made that have not been delivered, in some cases thankfully, because they would have caused so much damage to the leasehold system. There will be future leasehold reform, but hopefully it will be considered more comprehensively and more collegiately.” The Residential Freehold Association agreed with Fletcher, with a spokesperson saying: “The Leasehold and Freehold Reform Act is a defective and poorly evidenced piece of legislation which has ignored the outcomes of consultation with industry and leaseholders alike. “The government has pushed this Bill through without proper scrutiny, and as a result there is work to be done to ensure there are no unintended consequences that will negatively impact leaseholders.” However, Robert Poole, director of Glide, part of property services company Leaders Romans Group, welcomed the Act and said: “For years, the leasehold system has been a topic of contention, leaving homeowners and managers of blocks of flats grappling with uncertainties. The Leasehold and Freehold Reform Act aims to introduce measures to increase leaseholders’ rights, provide them with more control over their properties and make lease extensions more affordable. “It heralds a landmark shift in the leasehold system and a future in which homeowners are granted greater autonomy over their homes, with reduced costs and red tape. So it is good news that the Act has [received royal assent] despite many other Bills falling victim of the general election’s timing.” Seb Verity, head of research at Allsop, said: “That the Act has passed in the final days of this government will be a relief in providing some certainty and solutions, but the fact that it could be ‘washed-up’ in the short time available, while the Renters Reform Bill could not, showed that it largely addressed the low-hanging tenure and administrative issues. “The next government will very likely want and need to spend a significant amount of time in working out how to unpick the knottier, structural problems. Before the next attempted set of reforms – and both leaseholders/freeholders and the property industry are united in welcoming reform – whichever party gets into government needs to think through the complex legal and practical nuances that have bogged down all previous attempts and that can cause as many issues for all parties as they solve. “These include how to give leaseholders more autonomy and control without causing their costs to spiral; ensuring that commonhold units (if that is to be a genuine alternative to leasehold) are truly mortgageable by addressing some of the issues raised by the 2020 Law Commission report; and consideration of reasonable mechanisms to protect consumers from incurring unfair or hidden costs resulting from owning a non-freehold property.” Charlie Coombs, partner at Gerald Eve, said: “Although leaseholders will be delighted this has finally arrived, as it provides more rights, powers and protections heavily in the leaseholder’s favour, they will no doubt be surprised that secondary legislation is required to bring in large sections of the Act. “The government impact assessment suggested that it would be 2025 to 2026 before the majority of the changes came into force, so there is still great uncertainty in the market as to whether leaseholders should extend now or wait. “As this will transfer tens of billions in value from freeholders (including pension funds) to leaseholders, we can expect landlords to challenge the legality of some of these reforms as breaching their human rights, which the government was warned about but chose to ignore.” Photo © British Property Federation