The Leasehold Reform Bill – November 2023 Update
- Partner News
PLG – Property Support for Executors- 0
- 11 minutes read
On the 7th November, within the Kings Speech, a new Leasehold and Freehold Bill was announced, promising that there will be a reforming of the housing market by making it cheaper and easier for leaseholders to purchase their freehold, and tackle the exploitation of millions of homeowners through punitive service charges.
The timescale goal set is before the next general election, which many expect to take place in 2024. However, this is a target and not necessarily guaranteed.
Even though there have been promises this change will be made pretty much annually since 2017, there is now a sincere feeling within parliament that with an election on the horizon the Prime Minister will need to make a large gesture to win back a dwindling public support for the Conservative Party, and this Bill will certainly help swing favour back his way. With so much focus on the housing market, passing this Reform could certainly make a huge difference to how the public feel about the party.
We should however keep in mind that the Leasehold Reform Bill was announced in the Queens Speech in 2021 – and nothing came of it then! All we can do is wait and see!
What can we expect from a Leasehold Reform Act?
The short answer is to lower the cost of extending their lease or purchase their freehold. There is a hope that ground rent will be lowered to £0 too.
Currently leaseholders are unable to buy the freehold, so this freedom will allow those living in flats for example, to escape the feeling of being held to ransom by a landowner who is able to make considerable changes to lease charges, which can financially cripple home owners and put off any potential future buyers – leaving many feeling they are ‘imprisoned’ within their own bricks and mortar.
If a home owner decides that buying the leasehold is not for them, whether through considered choice, or the finance related in doing so, there will be the option to extend the lease by 990 years rather than 90 – which when we look at mortgage lending, will make a huge difference as many banks and building societies having policies that restrict lending once the lease drops below a certain number of years. Then there is the cost of ongoing lease extensions, which even if handed down inheritably, is still one that can be considerably, and fairly diluted.
In one case highlighted, someone bought a flat in 2008 with a £300 ground rent and a 10-year doubling clause, meaning the homeowner now pays £600. The same homeowner was quoted £25,000 to extend the lease – (information sourced by AJB, with thanks).
There are some other key changes that could make an appearance, they are:
- Abolishing the two – year ownership condition (this is the restriction that sees current leaseholders having to wait two years before they can the lease (or if the property is a house, buy the freehold to it).
- Abolishing leasehold houses – yep, this is still a thing! However, this could come with a caveat. Most houses sold as leasehold are done so to reduce the cost of the property. It will be interesting to see if this effects house prices on new home sites.
- Abolish ‘Marriage Value’ – Shockingly, this is thing. So, as an example – if you have a flat, and the lease is 60 years, once you increase the length of the lease, the value of the property will increase quite significantly. This increase is known as the ‘Marriage Value’ and by law, must be split with the freeholder. In my humble opinion, this should be abolished regardless of the reform, as it can see landowners profiting from a homeowner’s investment, and from a fee paid not through choice but necessity. Imagine this, you own the lease, and for someone to sell a flat that stands on the land, they pay £10,000 to increase the length of the lease, so you pocket that. Then, when they sell their flat, you are automatically legally entitled to a percentage of the difference in the value from the lower lease to the new extended lease – not a small figure at all. Great if you own the leasehold, not so good at all if you are the homeowner that does not.
- Ground Rent to be abolished – although I cannot see this happening, it would be great news if it was. What I predict is that at best we will see a calculated cap.
I have been involved in the property market for the best part of 30 years now, and there are some trends and lessons I have seen and learned during this period.
Firstly, new build flats are expensive but cheaper than new build houses. For anyone on a budget who wants a brand new home, flats / apartments (or the forementioned leasehold house) are the way forward. However, as with any new build, the resale value drops and with flats the drop is steeper. Therefore selling flats, or over 65 resident properties, become longer processes which in many cases end up with a sale price lower than initially hoped for by the Vendor.
The problems with selling leasehold?
I think this is the part I should stress that I have no personal problem with leasehold properties in the slightest. I understand they have their place and without them we would have a very different looking market. However, the law as it stands is outdated and is well past due being reformed. When there are changes in society, our environment and lifestyle changes. We can dive into the buying habits of the UK which usually follows something along the lines of:
- First time purchase – a flat or one bedroom house.
- Second purchase – a second bedroom is introduced, maybe with a small third.
- Third purchase – a three bedroom terraced / semidetached with parking and a garden is usually on the shopping list.
- Depending on the individual situation, there is a bigger purchase, which could be four or five bedrooms.
- This is usually where we see homeowners downsize. Maybe due to the children leaving home, or the want to do less housework.
With more family diversity and family breakdowns, these trends can change with people moving from third purchase back to the first purchase stage. Why is this relevant? Well think re-sale, think the cost of living too – with the additional stress any unexpected rise could have on a person.
What I am saying, is that we need to see a change in the way leaseholds are put together and indeed, managed. The resale market for flats is challenging due to the sheer volume of them that get placed for sale, add to that reduced lease terms and potential increases in charges and you have an even harder task.
This reform will enable leasehold homeowners to retain better value in their property, which will make buying on financially easier.
Some stats
In 2021-22 there were an estimated 4.98 million leasehold dwellings in England. This equates to 20% of the English housing stock. Of these, 2.86 million dwellings (57%) were in the owner occupied sector and 1.85 million (37%) were privately owned and let in the private rented sector. The remaining 272,000 (5%) were dwellings owned by social landlords and let in the social rented sector.
70% of the leasehold dwellings in England (3.5 million) were flats; the other 30% (1.5 million) were houses.
At Regional level, London and the North West had the highest proportion of leasehold dwellings, at 36% respectively, significantly higher than all other regions of England which had between 9% and 17%.
The number of leasehold dwellings in England increased in the two years between 2019-20 and 2021-22 from 4.65 million to 4.98 million. The apparent increase from 4.68 million in 2020-21 to 4.98 million in 2021-22 is not statistically significant.
(data sourced from gov.uk).
Some more stats
Just over a fifth of property sales in 2019 were leasehold – 238,000 transactions (approximately) – data provided by Land Registry.
Around 752,000 households with children, and 1.48 million over 65’s are leasehold homeowners – gov.uk sourced.
In summary
It is my opinion that if these changes are made, and the Reform is passed, this will be great for leasehold homeowners – current and future.
All we can do, is hope that the right decision is made at the earliest opportunity. If this was not in the best interest of homeowners, it would not keep being referred to.
Written by: Darren Leggett – Co-Founder of PLG – Striving To Put An End To Executor Stress
Darren has almost 30 years of experience working within the property market, and where his passion is working with law firms and legal professionals to manage the property side of probate, he keeps up to date with any and all relevant property news and changes, be it legally or statistically.
You can contact Darren directly via his email address, darren.leggett@theplgroup.co.uk
This article was submitted to be published by the Property Ladder Group as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.
In the words of James Emery – Tower Street Finance, there is a story here.
On the 28th September 2022, the doors opened and delegates were welcomed to The Coach House, Markshall Estate in Colchester. They were offered teas, coffees and breakfasts, then sat at their round tables situated in a beautiful barn conversion.
Everyone was smiling, seemingly stress free and I opened the day, thanking everyone for supporting this new conference concept and wishing them a great day of learning.
But where is the story in that? It is all quite straight forward; team decide to put on a conference and do so. Well, not quite.
To really understand we must go back around five years. Helen and I had not established PLG at this point, and even though I was a partner at another firm I had zero influence. Something I am now happy about as if I was taken more seriously, I would not be where I am today. Helen and I pitched the conference idea and was told it was a stupid one, that it wouldn’t work and when we pushed, we were told we was not good enough and we didn’t have what it takes to make it work.
Enter Gill Steel, the oracle herself and owner of LawSkills – Leading Legal Minds. Upon speaking to Gill she declared an interest in not just speaking, but partnering us to put on the conference. Well, when you have that kind of support you know you have a serious chance of pulling this idea off. Yet, again we was told it was a stupid idea and no one would attend.
Skip forward to 2021, Gill, Helen and I were sat in Greyfriars restaurant one evening in Colchester discussing the Private Client sector and how Covid had affected the industry. We got back onto the subject of learning and CPD, Gills online training work and how she was due to do one last conference which was to be her swan song, as she was effectively retiring from travelling, however it was cancelled due to the pandemic.
Before we knew what was happening the conversation turned to our previous idea of hosting our own conference.
“Shall we do it?”
“Yes….let’s do it!”
I will never forget how I felt at that moment. There was pure adrenalin running through my body. We was doing this. Little PLG teaming up with the leading Private Client speaker in the UK, our vision was going to become a reality, could we do it…..or was we going to be proved wrong?
From the start we said this conference had to be different. On speaking with solicitors and legal professionals it became obvious that they had grown tired of the usual format for their CPD, so we decided to do things OUR way.
Rather than just talking to the audience, Gill suggested case study, something Helen and I were in total agreement with, as it fitted in with our thoughts too. It would be like PLG Digital, but on stage and live!
We also had the mighty Martin P Holdsworth of IDR Law as a speaker. The fact Martin agreed to support us with this project was a huge boost to our moral – and indeed confidence. This man is a legend in the sector, but also very busy, so the fact he agreed to travel from one part of the country to ours was a great compliment.
We had our key speakers, and they are the best in the business! Pretty good start I would say.
Later that year I attended my brother’s wedding. A beautiful building and grounds, somewhere that screamed class. It dawned on me that this would make the perfect venue for our conference, and as Helen was there with me I chatted with her about it. We took photos and sent them to Gill to gain her thoughts. That was it, we had a venue in mind! Well, we said it was going to be different and let’s be honest, a grand manor house is certainly different to the usual conference rooms we tend to find ourselves in!
Enter Ben Furlong of Estate Search. On the 10th Feb 2021 I interviewed Ben for PLG Digital, another incentive of the Property Ladder Group that saw leaders of service providers in the sector be quizzed about how they can provide support to legal professionals dealing with Probate, Court of Protection and Trust matters. At the end of the interview I mentioned to Ben that we was looking to hold the conference, and whether he fancied coming along as a sponsor, something we had given no real thought to at the time.
Ben immediately offered to pay for the after event drinks….something that had not been considered. A free drink or two to unwind after a day of learning, a chance to network and catch up with faces old and new? What a plan!
Hands shook, deal was done!
Helen, Gill and I spoke about food, there was no way we were going for the usual conference chicken (Antony Singer, I will always remember those days…you too had more of an influence than you realise!). So we went all out, ensuring that the best available was booked and that the presentation would be special. We even paid for a dessert wall, where the chef would make 250 mini specialist cakes for the delegates to enjoy.
The next time Gill, Helen and I met we looked at the matter of sponsors, and we collectively agreed that we would only invite companies that we would endorse ourselves, that was the whole point of our conference and why we decided on the name "Synergy". We agreed that synergy is what the sector needs, and that collaboration with the right service providers will ensure a greater experience for the end customer, someone that is likely to be going through one of the most difficult times of their life. So, synergy is vital to ensure service delivery.
Following this conversation we approached our list, all of which said yes to this collaboration.
