Changing landscapes in residential leasehold
The White Paper sets out the Governments’ plans to ban the sale of new leasehold flats and require new flats to be offered on a commonhold basis and a discussion of how the Government intends to amend the existing commonhold procedure to make it easier for existing leasehold buildings to convert to the commonhold structure.
The provisions changing the qualifying criteria for right to manage claims will come into force on 3 March 2025 under the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025. These will increase the non-residential limit on right to manage claims from 25% to 50% and alter the costs position, in terms of what costs arising out of a right to manage claim an RTM Company and its members are liable for.
Closure of consultation on permitted insurance fees for long residential leaseholders.
The provisions removing the two-year qualifying criteria for lease extensions of houses and flats and to purchase the freehold of a house come into force.
The consultation: seeks views on the types of activities which landlords and freeholders currently carry out in managing and arranging insurance that should be permitted under the Leasehold and Freehold Reform Act 2024 for the purposes of creating secondary legislation.
The Leasehold and Freehold Reform Act 2024 (Commencement No. 1) Regulations apply from 31 October 2024 and bring into force a number of provisions of the Act relating to building safety. The Regulations do not bring into force any other provisions of the Act relating to service charge or estate management charge regulation or enfranchisement or lease extensions.
A draft Leasehold and Commonhold Reform bill is announced during the King’s Speech. The text of the Bill will be available when presented to Parliament in due course.
Certain provisions of the Act concerning Building Safety and rentcharges will come into force on 24 July 2024. The remainder of the provisions will require secondary legislation to be brought into force.
The Committee Stage will commence on 22 April 2024.
The House of Lords Industry and Regulators Committee publishes letter to the Government following conclusion of its Inquiry into regulation of property agents recommending property agent regulation.
The third reading of the Bill in the House of Commons took place on 27 February 2024. The first reading in the House of Lords occurred on 28 February 2024. The second reading is on a date to be fixed.
Closure of consultation on capping ground rents in existing long residential leases.
The Leasehold Reform and Freehold Bill is presented to Parliament. This is a wide-ranging bill which will make changes to lease extension, enfranchisement, right to manage, service charges and estate management charges.
The consultation: Modern leasehold: restricting ground rent for existing leases seeks views on capping ground rents in existing long residential leases and proposes five potential options for capping ground rents including imposing a peppercorn ground rent or capping ground rents based on the property value.
The Leasehold Reform and Freehold Bill is announced during the King’s Speech. The text of the Bill will be available when presented to Parliament in due course. Key provisions include enabling leaseholders to seek a statutory lease extension to acquire an additional 990 year term, removing the qualifying requirement for a leaseholder to have owned a house or flat for 2 years before they can extend their lease by statute and extending rights to challenge reasonableness held by leaseholders to freehold owners in connection with estate management charges.
These require the Responsible Person in relation to a high-rise residential building to keep certain records and information (as described in the Regulations) where a building contains two or more sets of domestic premises and/or contains common parts through which residents would need to evacuate in an emergency.
This Act received Royal Assent on 15 March 2021. Regulations were made bringing its provisions into force in England and Wales on 26 December 2022. The Act inserts new provisions into the Electronic Communications Code to allow operators to apply to the First-Tier Tribunal (Property Chamber) for code rights where a tenant of a block of flats wants to install telecommunications equipment, such as broadband, and a landlord has failed to respond to formal notice.
The £4.5 billion Building Safety Fund reopens for applications. Accompanying guidance includes the criteria for making a new application.
The Government has announced that the Leasehold Reform (Ground Rent) Act 2022, which received Royal Assent earlier this year, will come into force on 30 June 2022.
These Regulations come into force on 30 June 2022 and make provision for certain residential and non-residential buildings to have one or a specified number EV charge points.
Closure of RICS consultation on the 4th edition of the Service Charge Residential Management Code.
This is brought into force in England under The Fire Safety Act 2021 (Commencement) (England) Regulations 2022. It clarifies and extends the operation of the Regulatory Reform (Fire Safety) Order 2005 to multi-occupied residential buildings.
The Building Safety Bill receives Royal Assent. This is a significant piece of legislation which will be implemented via secondary legislation.
The 3rd edition was published in 2016. RICS opens consultation on the updated 4th edition for landlords, leaseholders, managing agents, FTT appointed managers and occupiers of residential leasehold property.
Closure of leasehold and commonhold reform consultation.
The majority of the provisions of the Act will come into force on a date to be appointed but the Government has committed to a date within 6 months (except for retirement homes).
The research paper contains data on the number of short-term lettings, summarises calls from certain organisations for increased regulation of short-term lettings and reviews measures taking in Scotland, Wales, Northern Ireland and outside of the UK.
The Department for Levelling up, Housing and Communities publishes consultation: Reforming the leasehold and commonhold systems in England and Wales seeking views on a number of recommendations made by the Law Commission on enfranchisement and right to manage including raising the non-residential limit from 25% to 50% for collective enfranchisement and right to manage claims.
This is the second stage of a two-part consultation and builds on the Future Homes Standard consultation (see 19 January 2021). It includes recommendations for both non-domestic and domestic buildings. One of the proposals is for the Government to reduce overheating risk in new residential buildings and to introduce changes to ventilation standards.
The Government proposes that legislation is introduced requiring:
Further proposals are made for non-residential buildings.
The factsheets provide information about key aspects of the Bill. These include a factsheet on dutyholders, buildings to which the more stringent regulatory regime will apply, safety cases, the Building Safety Regulator, accountable persons, refurbishments and more.
The Government announces that the Waking Watch Relief Fund will re-open for applications from 16 September 2021 to 10 December 2021.
The Briefing Paper outlines the steps taken by The Regulation of Property Agents Working Group and Government consultations on the regulation of estate agents. A code of practice is being developed for property agents in all aspects of residential property.
The Briefing Paper summarises the proposed reforms to increase take up of commonhold, change the procedure to obtain a lease extension and enfranchise and to reduce ground rents in new leases to zero.
Closure of consultation: Personal Emergency Evacuation Plans in High Rise Residential Buildings
The Home Office launches a consultation on Personal Emergency Evacuation Plans in High Rise Residential Buildings to provide a tailored approach to evacuation to those residents who would have difficulty self-evacuating in the event of a fire.
The Government announces that the Waking Watch Relief Fund will re-open for applications from 26 May 2021 to 24 June 2021.
The Government announces the launch of the Commonhold Council which is an advisory panel of leasehold groups and industry experts drawn together to inform the Government on the Commohold model of home ownership.
This Bill limits ground rent in new residential long leases to a peppercorn. The Bill will now make its way through Parliament.
These Regulations enable individuals to apply for a standard breathing space moratorium or a mental health crisis moratorium. If a moratorium is put in place, this is likely to impact upon action which may be taken by landlords to recover arrears from that individual tenant.
The Fire Safety Act 2021 is published, but not yet fully in force. It clarifies and extends the operation of the Regulatory Reform (Fire Safety) Order 2005 to multi-residential buildings.
These Regulations come into force on 1 April 2021 and reflect the changes to the Government’s new shared ownership model which enables purchasers to buy an initial 10% share of a property. The Regulations relate to exemptions to the right to buy the freehold of a house and to Rent Act protection where there is a shared ownership lease where the purchaser owns a share of at least 10%.
The Health and Safety Executive announces Peter Baker as the new Chief Inspector of Buildings who will oversee the establishment of the Building Safety Regulator.
Closure of consultation: Improving home energy performance through lenders
The Government announces an additional £3.5 billion in funding to pay for the removal and replacement of certain cladding in high-rise residential buildings of 18 metres of above. In addition, a loan scheme is to be established for leaseholders in blocks of between 11 and 18 metres where cladding remediation works are required.
The Government announced that the £30 million Waking Watch Relief Fund opened for applications (except in relation to Greater London which will be administered by the Greater London Authority (on a date to be announced) but not later than 22 March 2021). The fund is intended to pay the costs of installing a common fire alarm system in eligible residential buildings in England on or after 17 December 2020.
The Government has announced that all homes and businesses will have to meet more rigorous new energy efficiency standards to lower consumption and bills.
The Government announces that it will establish a Commonhold Council made up of leasehold stakeholders and intends to create a new right for leaseholders to extend a lease of a flat or a house by 990 years.
The Government announces a £30 million Waking Watch Relief Fund for the installation of fire alarm systems in private sector high-rise buildings with unsafe cladding after 17 December 2020. In addition, the deadline to apply for the £1 billion Building Safety Fund for the removal and replacement of unsafe non-aluminium composite material cladding systems is extended from 31 December 2021 to 30 June 2021.
The Department for Business, Energy and Industrial Strategy launches a consultation: Improving home energy performance through lenders seeking views on the principles of how best to improve the energy performance of domestic properties with a mortgage through obligations on lenders. These include a potential requirement for all lenders to publicly disclose information on the energy performance of their portfolios.
A House of Commons Briefing Paper: “Freehold houses; estate charges” is published. The paper provides background on the issues surrounding freehold estate charges and sets out the Government’s proposals for reform in England, which include a proposal to give rights to freeholders of private estates similar to the rights of leaseholders to challenge the reasonableness of service charges.
Closure of Fire Safety Consultation
Closure of consultation on the draft code of practice.
The MHCLG recommends the introduction of a scheme which offers properties for sale with a 30% discount from the market value to people living locally who are first time buyers or key workers. The Government's response proposes:
The Law Commission publishes its reports on Enfranchisement, Right to Manage and Commonhold proposing some fundamental changes to the residential leasehold sector including recommending commonhold to replace leasehold and overhauling the Enfranchisement and Right to Manage processes.
The Home Office publishes a consultation on Fire Safety to strengthen the Regulatory Reform (Fire Safety) Order 2005 and implement the Grenfell Tower Inquiry Phase 1 report recommendations.
The Government has described the draft Bill as bringing forward “the biggest improvements to building safety in nearly 40 years”.
A draft overarching Code of Practice for the regulation of property agents is published upon which The Royal Institute of Chartered Surveyors and The Property Ombudsmen are consulting. The Regulation of Property Agents (RoPA) Steering Group will review responses after closure of the consultation on 4 September 2020.
The MHCLG has published a report estimating the number of leasehold dwellings in England in 2018/2019. The report estimates that there were 4.5 million leasehold dwellings in England representing about 19% of housing stock in England.
Closure of First Homes Consultation.
The headline announcements from the Government’s response are:
Following the Coronavirus outbreak, a new Practice Direction is introduced into the Civil Procedure Rule 1998 which stays all new and existing possession proceedings including proceedings for forfeiture of long leases for 90 days from 27 March 2020.
The Government introduces the Fire Safety Bill into Parliament to bring multi-occupied residential premises into the scope of the Regulatory Reform (Fire Safety) Order 2005.
The Government announces a £1 billion fund in 2020 to 2021 for the removal and replacement of unsafe non-aluminium composite material cladding systems (including high-pressure laminate, wood and other class C/D cladding) from high-rise residential buildings in both the private and social housing sectors.
The Housing Ombudsman publishes a revised Scheme giving stronger powers in relation to housing redress. The Scheme will take effect from 1 July 2020 and will include:
The Competition and Markets Authority (“the CMA”) publishes an updated report on their investigation into whether there have been breaches of consumer protection law in the residential leasehold housing sector and the next steps, including future enforcement action by the CMA and the areas where the CMA considers that the law needs to change in the future.
The CMA raises concerns in relation to:
The CMA announces it will be taking enforcement action in relation to certain instances of mis-selling of leasehold property and to address high and escalating ground rents. Its investigation continues.
The MHCLG publishes its response to the consultation: Redress for Purchasers of New Build Homes and the New Homes Ombudsman. It announces that the Government intends to introduce new legislation obliging developers of new build homes to belong to the New Homes Ombudsman and to implement a code of practice for developers building and selling new build homes.
A House of Commons Briefing Paper: Leasehold high-rise flats: who pays for fire safety work is published. The paper considers progress in implementing remediation works and issues raised by landlords and residents.
The MHCLG launches a consultation: First Homes. The consultation proposes the introduction of a scheme which offers properties for sale with a 30% discount from market value to people living locally who are first time buyers or key workers.
The Law Commission publishes its report on options to reduce the price payable on enfranchisement. The report proposes three alternative schemes of valuation and a menu of sub-proposals which can be added to any of the three valuation schemes for the Government to consider. It concludes that whichever final valuation method is selected must sufficiently compensate a landlord for interference with its property rights.
In the background briefing to the Queen’s Speech, the Building Safety Bill and Fire Safety Bill are announced to put in place new regulatory regimes for building safety and extend the Fire Safety Order to building owners and managers of multi-occupied residential premises of any height. The Bills are not published in draft form.
The Royal Institute of Chartered Surveyors, the Building Societies Association and UK Finance agree a new industry-wide voluntary valuation process in relation to buildings above 18 metres. The External Wall Fire Review Process requires a fire safety assessment to be carried out by a suitably qualified person and is valid for five years.
Grenfell Tower Inquiry publishes Phase 1 report dealing with the events of 14 June 2017.
The Phase 1 report makes a finding at paragraph 2.16 that it was not the original intention “to include in Phase 1 of the Inquiry and investigation into the extent to which the building complied with the requirements of the Building Regulations. However…..there was compelling evidence that the external walls of the building failed to comply with Requirement B4(1) of Schedule 1 to the Building Regulations 2010, in that they did not adequately resist the spread of fire having regard to the height, use and position of the building.”
A number of recommendations are made in the report to introduce new legislation to require owners and managers of high-rise residential buildings to provide specific information and documentation to local fire and rescue services and to inspect fire doors to ensure they comply with applicable legislative standards. In addition, owners/managers of all residential buildings (not limited to high-rise buildings) to provide fire safety instructions for all occupants in the building.
Closure of consultation: Electric vehicle charging in residential and non-residential buildings.
Closure of consultation in respect of the discussion paper: Making home ownership affordable.
The MHCLG publishes a discussion paper on making home ownership affordable which proposes to introduce a simplified model for shared ownership of residential properties.
The main proposals are the introduction of a new national simplified model for shared ownership, permitting increases of shares by 1% or more (currently the minimum incremental increase is 10%) and the removal of pre-emption clauses allowing landlords an exclusive right to market the property for eight weeks.
Closure of consultation: Redress for purchasers of new build homes and the New Homes Ombudsman: a technical consultation.
The Housing, Communities and Local Government Select Committee publishes an updated Briefing Paper on Leasehold and Commonhold reform.
Closure of consultation: Building a safer future: proposals for reform of the building safety regulatory system.
The working group on Regulation of Property Agents publishes its report. The main recommendations are:
to regulate property agents by creating an independent regulator and introducing mandatory qualifications and a code of practice;
regulation to cover estate agents in the UK and letting and managing agents in England together with auctioneers, property guardian providers and online agents but not online portals;
introduce a mandatory licensing scheme overseen by the regulator; and
establish a new public body to undertake the role of regulator.
The Department of Transport publishes a consultation: Electric vehicle charging in residential and non-residential buildings proposing to alter building regulations for new residential buildings to include requirements for electric vehicle charge points.
The Government publishes its response to the Housing, Communities and Local Government Select Committee Report on Leasehold Reform.
The Government confirms in its response that it agrees the following recommendations of the Committee:
The MHCLG publishes a consultation: Redress for purchasers of new build homes and the New Homes Ombudsman: a technical consultation. The consultation seeks views on the role of a New Homes Ombudsman including its powers and a code of practice for developers of new build homes.
The Competition and Markets Authority launches a formal investigation into the leasehold housing market.
The MHCLG publishes a consultation: Building a safer future: proposals for reform of the building safety regulatory system. The proposals include a new regime for residential buildings over 18 metres and the introduction of the concept of a “golden thread” of information on the structure of the building and changes made to it to be held digitally and updated throughout the life cycle of the building. In addition, new concepts of “dutyholders” and “accountable persons” to have clear responsibilities (to be defined in legislation following the consultation).
The Government announces a £200 million fund to replace unsafe aluminium composite cladding from privately owned buildings over 18 metres high with applications to be made by 31 December 2020.
Closure of the Law Commission’s Consultation: Leasehold home ownership: exercising the right to manage.
The MCHLG announces 40 developers, agents and landlords have signed up to an industry pledge agreeing not to include a clause in any new lease for ground rent to double more frequently than every 20 years and to identify and amend any existing leases within their portfolios where those clauses are present and include a link ground rent increase to RPI.
The Housing, Communities and Local Government Select Committee publishes its report following its inquiry into leasehold reform.
The headline recommendations made by the Committee include:
Essential Reading: James Souter and Lauren Fraser - Is it the end of the road for residential leasehold?
Essential Reading: James Souter and Lauren Fraser - Abolishing residential leasehold could create more problems than it will solve.
Closure of Law Commission consultation Reinvigorating commonhold as an alternative to leasehold ownership.
The Law Commission publishes a consultation Leasehold home ownership: exercising the right to manage.
The Law Commission’s intention is to simplify the right to manage (“RTM”) process and to give power to the First-Tier Tribunal (Property Chamber) to waive procedural mistakes so that less claims to acquire the RTM fail.
In addition, it proposes to relax the current qualifying criteria so that buildings with more than 25% non-residential parts could qualify for the RTM and to establish clearer rules for the transfer of information between the landlord and the RTM Company in relation to management matters.
It also proposes to permit an RTM Company to acquire the RTM over multiple buildings on an estate rather than, as is currently necessary, requiring a single RTM Company to acquire the RTM over a single building on an estate.
The Government publishes its response to Strengthening consumer redress in the housing market. Proposals include:
Closure of the Law Commission’s consultation: Leasehold home ownership: buying your freehold or extending your lease.
The Law Commission publishes a consultation paper: Reinvigorating commonhold: the alternative to leasehold ownership.
The Commonhold and Leasehold Reform Act 2002 introduced Commonhold as an alternative structure to leasehold. It allows for the ownership of a freehold flat within a larger residential development without leases or third party freeholders and there is no forfeiture because the unit holders own their freehold.
The Law Commission’s proposals for commonhold include that it should be possible to convert to commonhold without the unanimous consent of leaseholders and that the threshold for conversion should be 50% or 80% of long leaseholders of the flats in the building.
The MHCLG publishes Considering the case for a Housing Court: call for evidence to consider the experiences of private landlords in possession actions in the County Court, the experiences of Court and Tribunal users and views on the transfer of property cases from the Courts to the First-Tier Tribunal (Property Chamber) and vice-versa.
The Tenants’ Associations (Provisions Relating to Recognition and Provision of Information) (England) Regulations 2018 come into force with the aim of making it easier for tenants’ associations of residential properties in England to become legally recognised and to obtain information from landlords about other tenants who have a legal right to join a tenants’ association. One of the main changes is to reduce the threshold for an association to be legally recognised so that it must be recognised where it represents at least 50% of the qualifying tenants.
The Government publishes its response to Recognising residents’ associations, and their power to request information about tenants. It concludes that it intends to introduce new legislation in the autumn of 2018.
The MHCLG publishes the Government’s consultation paper: Implementing reforms to the leasehold system in England: A consultation.
The consultation provides more detail on the Government’s proposals to ban the sale of leasehold houses and to cap ground rents in new residential leases. The key points are:
The Law Commission publishes a consultation paper entitled: Leasehold home ownership: buying your freehold or extending your lease.
The consultation makes a number of proposals to overhaul the procedure for the leasehold enfranchisement of houses and flats including:
introducing a single scheme for “residential units” rather than separate schemes for houses and flats;
Lease Extension
abolishing the requirement to own the property for two years in order to qualify;
Individual Acquisition of Freehold
the qualifications based on financial limits such as the low rent test and rateable values to be removed;
new qualifying criteria that if there is more than 25% non-residential use then the building will not qualify (as already exists for collective enfranchisement claims);
Collective Enfranchisement
introducing a requirement for the freehold to be purchased by a company limited by guarantee on behalf of the participating leaseholders unless there are less than four units;
permit collective enfranchisement of an estate rather than single blocks.
no further claim can be made for five years once a collective enfranchisement has concluded;
new right for non-participating leaseholders to later purchase a share in the freehold company;
Procedure & Valuation
single procedure for lease extensions, individual freehold purchase and collective freehold purchase with standard forms;
the Law Commission’s stated aim is to provide a better deal for leaseholders as consumers and the consultation paper sets out alternative valuation options to seek to reduce premiums.
The Housing, Communities and Local Government Select Committee launches an inquiry into leasehold reform.
The MHCLG publishes a How to lease guide for current and prospective leaseholders setting out the difference between leasehold and freehold property and the rights, obligations and implications of being a leaseholder.
Closure of consultation: Strengthening consumer redress in the housing market: A Consultation.
The MHCLG publishes its response to the call for evidence on improving the home buying and selling process and announces that it intends to publish guides on “How to Buy” and “How to Sell” with the aim of ensuring customers are better informed of the home buying and selling process and to potentially limit fees for the provision of leasehold information and to standardise the leasehold information form.
The MHCLG publishes the Government’s response to the call for evidence on protecting consumers in the letting and managing agents market. The key proposals are:
The MHCLG publishes the Government’s response to the housing White Paper consultation: Fixing our broken housing market.
The MHCLG publishes a consultation: Strengthening consumer redress in the housing market: A Consultation to examine options for improving consumer redress in housing.
The DCLG publishes the Government’s response to Tackling unfair practices in the leasehold market. The proposals include:
The DCLG publishes a call for evidence seeking views on improving the home buying and selling process: Improving the home buying and selling process: Call for Evidence.
The DCLG publishes a call for evidence on Protecting consumers in the letting and managing agent market seeking views on whether a new regulatory model is needed for agents in the leasehold and private rented sectors.
Closure of consultation: Tackling unfair practices in the leasehold market.
The DCLG publishes a consultation: Tackling unfair practices in the leasehold market. The proposals include:
The DCLG publishes a consultation: Consultation on recognising residents’ associations, and their power to request information about tenants.
The Government proposes to make it easier for a secretary of a tenants’ association to obtain contact information of qualifying tenants from a landlord to increase the likelihood of the association being formally recognised under Section 29 of the Landlord and Tenant Act 1985.
The then DCLG publishes a Housing White Paper: Fixing our broken housing market, commencing a consultation on changes to planning policy and legislation in relation to planning for housing, sustainable development and the environment.
The paper details the Government’s intention to review the planning system, and the private rented market to, in the Government’s words, “make renting fairer” for tenants and the leasehold sector to “promote transparency and fairness” by reviewing ground rent structures and the sale of leasehold properties.