The Government's initial response on proposed leasehold reform

England and Wales

The Government has now given an initial press release in response to certain elements of the proposed reforms on Leasehold following the publication on 21 July 2020 of the Law Commission’s suite of three residential reports produced as part of its Thirteenth Programme of Law Reform. Please see our Law Now articles (Law Commission Reform: buying your freehold or extending your lease and Law Commission Reform on proposed changes to Commonhold).

It is fair to describe the Government’s response at this stage as brief, amounting to more of a political statement showing its current direction of travel rather than amounting to detailed proposals.

The headlines so far are as follows:

  • Marriage value being a key element of the enfranchisement valuation will be abolished;
  • Lease extensions for both flats and houses will be for a 990 year term as opposed to current terms of 90 years for flats and 50 years for houses all at a zero ground rent.
  • A further commitment by Government to restrict ground rents to zero on all new leases including retirement leasehold properties.
  • The introduction of an online calculator and introducing prescribed rates for calculating valuations.
  • A Commonhold Council to be set up as a partnership of leasehold groups, industry and Government, to “prepare” home owners and the market in a move to reinvigorate commonhold and seek to encourage the take up of commonhold to replace leasehold.
  • No timetable overall for all relevant reforms to be implemented albeit some measures will go forward in the next Parliamentary session.
  • A response to the remaining Law Commission recommendations including commonhold will follow.

The announcement is an initial light touch response only to the more detailed proposals from the Law Commission. It nevertheless demonstrates, for now, the Government’s ongoing commitment to be seen to be taking steps to address the perceived existing unfairness in the leasehold system. The devil will be in the detail and there is plenty of detail that will need to follow these announcements. Nevertheless, the immediate impact of this news will be strongly felt by landlords nationwide where it is already estimated that the proposals will wipe hundreds of millions, if not more, off the value of property in Prime Central London alone.