Labour and leasehold

The people have spoken, and Labour has been elected to govern the land of leasehold. There is prevailing hope that order and equity will be established by the ruling party.

Housing is a critical concern and Labour pledged in its pre-election manifesto to make key changes and improve conditions for leaseholders.

Its pledge being:

“Labour will act where the Conservatives have failed and finally bring the feudal leasehold system to an end. We will enact the package of Law Commission proposals on leasehold enfranchisement, right to manage and commonhold. We will take further steps to ban new leasehold flats and ensure commonhold is the default tenure. We will tackle unregulated and unaffordable ground rent charges. We will act to bring the injustice of ‘fleecehold’ private housing estates and unfair maintenance costs to an end.”

Now, let us contemplate that pledge in the context of the Conservatives’ contribution before the dissolution of Parliament.

The Conservatives pushed through the Leasehold and Freehold Reform Bill to enact the broadest ranging legislation for leasehold in over two decades.

The Leasehold and Freehold Reform Act 2024 (‘the Act’) includes changes to:

• Leasehold Houses (ban on grant or assignment of certain residential leases, regulation of permitted leases, prescribed statements in leases and restrictions on title, redress: right to acquire freehold or superior leasehold estate, enforcement against breach and financial penalties)
• Statutory Freehold Acquisitions and Statutory Lease Extensions (removal of the two years’ qualifying period, removal of restrictions on repeated claims, increase of non-residential limit to 50%, increase of term for houses and flats to 990 years (at peppercorn rent for houses to align with flats), new method for calculating price payable on freehold acquisitions and lease extensions, adjustment of tenant’s liability for costs, consolidation of tribunal’s jurisdiction)
• Right to Replace Rent with Peppercorn Rent (for leases of 150 years or more)
• Right to Manage (increase of non-residential limit to 50% and adjustment of tenant’s liability for costs)
• Service and Estate Management Charges (greater regulation, limitation on estate management charges, insurance, administration charges and litigation and non-litigation costs)
• Leasehold and Estate Management (redress schemes, enforcement against breach and financial penalties
• Rentcharges - additional interpretation of terms and regulation of remedies for arrears
• Amendment to Part 5 of the Building Safety Act 2022 (remediation of building defects and insolvency of ‘responsible persons’)

However, section 124 of the Act provides that most of it requires secondary legislation.

It is only the following sections that come into force on 24 July 2024 (currently):

• Rentcharges (additional interpretation of terms and regulation of remedies for arrears) - section 113
• Amendment to Part 5 of the Building Safety Act 2022 (recovery of professional costs through service charge, repeal of section 125 of the Building Safety Act 2022, higher-risk and relevant buildings: notification in respect of insolvency) – sections 117, 118 and 119.

The Act has received mixed reviews from stakeholders and professional alike. The consensus is that the Act is largely ineffective without secondary legislation and merely serves to create more incertitude.

So, what happens next? Will Labour enact the secondary legislation required to bring the entire Act into force, or will the Act be amended, or could the Act be repealed and replaced entirely?

Labour describes leasehold in its manifesto as modern-day “feudalism” which is arguably an exaggerated but nonetheless common comparison. A picture is painted of unscrupulous landowners profiteering from leaseholders and not providing them with the protection they might have received in the Middle Ages. The reference to “feudalism” combined with the reference to “fleecehold” are clear statements that Labour intends to take up the baton of leasehold reform.

Bringing the leasehold system “to an end” is an unlikely scenario as there are about five million leasehold homes in England. However, abolishing the grant of new leases and enabling existing leaseholders to convert to freehold or commonhold is a very real scenario. Labour will undoubtedly be the orchestrator of greater leasehold reform than the Conservatives.

It seems that Labour is rightly focused on the Law Commission’s 2020 proposals and could apply more of them to create legislation which eclipses the Commonhold and Leasehold Reform Act 2002 and transform the UK property landscape.

Alas, leasehold reform is not part of Labour’s ‘First Steps’ and will not happen immediately. Nonetheless, it will happen. And, with Labour’s commitment to building more homes, the reinvigoration of commonhold appears all but certain.

Ultimately, the key question is ‘How long will Labour take to enforce its plans for leasehold reform?’

As we all enjoy the fine summer weather, this Labour government could precipitate heated debates over valuations for freehold acquisitions and lease extensions with the landed estates and other landlords, and the weather could turn quite blustery in the land of leasehold.