The Leasehold Conundrum
Will 2024 Bring An Answer?
By the end of this year we will have a much clearer picture of what the future of leasehold ownership looks like, writes property lawyer Stephen Warren of Forbes
In late 2023 the Government introduced the Leasehold and Freehold Reform Bill to the House of Commons. The Bill promised to deliver on both the Government’s manifesto commitments with regards to unfair practices in leasehold property but also several of the recommendations made by the Law Commission in 2020. Much of what is proposed will make a real difference to those who own leasehold properties but one of the more contentious issues is that of ground rents.
As well as introducing the above Bill the Government also launched a consultation on five proposals which they believe may be the best way forward regarding ground rents that will benefit leaseholders. The five options were:
• Setting ground rents at a peppercorn.
• Putting in place a maximum financial value which ground rents could never exceed.
• Capping ground rents at a percentage of the property value.
• Limiting ground rent in existing leases to the original amount when the lease was granted.
• Freezing ground rent at current levels.
The consultation ran from 9th November 2023 to 17th January 2024 and we are currently waiting to see what the outcome of that consultation was. In particular, what option the Government intends to move forward with, if indeed it moves forward with any of them at all. This is a crucial junction in leasehold ownership and the outcome of this consultation has potentially widespread implications across the housing market and leaseholders and freeholders alike will be keenly interested in the outcome.
If you do have a vested interest in this issue (irrespective to which side of the coin you are on) and you have not already done so then it may be worth perusing the impact assessment the Government produced on 6th December 2023. Take the first of the above options as an example. Setting existing ground rents at a peppercorn would, on paper, appear the best option for leaseholders. At what cost though? Well, according to the impact assessment, freeholders could see a loss of income of £5.1 billion over a 10-year period through loss of ground rents and a loss of asset value estimated to be £27.3 billion. This is the balancing act the Government know they are facing. How do they introduce change that will make a difference to leaseholders but at a cost that is acceptable to the wider housing market.
We should find out what proposal is being taken forward soon, if any, and hopefully by the end of 2024 we will have a much clearer picture of what the future landscape of leasehold ownership looks like. For now, all that leaseholders, and freeholders alike, can do is wait and see what happens next.
To speak to a Property Lawyer contact Stephen Warren on 0333 207 1130 or email: stephen.warren@forbessolicitors.co.uk
