Leasehold reform - what do agents and conveyancers need to know?

You will hopefully have seen that the Leasehold Reform (Ground Rent) Act 2022 has now received its Royal Assent, meaning it has passed through Parliament and its provisions will come into effect from June 30 this year – although retirement properties will not be covered until April 1 next year.

Given that leasehold reform has been a huge part of our, and the industry’s, campaigning workstreams for many years, it is clearly positive to see a number of key measures being introduced.

All property industry stakeholders, particularly agents and conveyancers, need to be aware of what this means, and there are essentially four key strands to understand. So, from June 30, the Act means that:

· If any ground rent is demanded as part of a regulated, new residential long lease, it cannot be for more than one literal peppercorn per year. In effect, most future residential leaseholders will not be faced with financial demands for ground rent.

· Landlords will be banned from charging administration fees for collecting a peppercorn rent, closing a possible loophole where a landlord could try to make a monetary charge via another route.

· Landlords who require a payment of ground rent in contravention of the Act will face penalties of between £500 and £30,000 enforced by way of a civil penalty regime.

· For existing leaseholders entering into voluntary lease extensions after commencement, the extended portion of their lease will be reduced to a peppercorn.

It’s fair to say that a large number of landlords have already introduced these measures for those signing new leases, but clearly over the next couple of months, it’s going to be important that those working for clients signing leases need to ensure the post-30th June rules are being followed.

We anticipate the Government will be publishing specific guidance for consumers on this, however in the meantime, please avail yourselves of the new rules and how they impact clients.

So, all well and good, and as mentioned a real step forward, and one that many organisations have been lobbying for in order to ensure these unreasonable costs are swept from the market.

And yet, if we were to be completely honest here, this is the tip of the iceberg in terms of the leasehold reforms we are seeking and, dare we say it, the reforms the Government has already agreed to in principle but has yet to deliver.

For example, the implementation of the Law Commission Reports in leasehold enfranchisement, Right to Manage, and Commonhold, plus previously announced legislation on Leasehold Reform, reasonable fees and timescales for administrative activities, and managed freehold, which has yet to make the statute book.

We recently wrote to Lord Greenhalgh at the Department for Levelling Up, Housing and Communities stressing there was still much to do in this area, and that while the clock ticks, the potential for ongoing consumer harm and detriment is far greater. While appreciating that this type of legislation can take time, we appear to have been waiting a long time for reform which we had already been led to believe was agreed.

Lord Greenhalgh was kind enough to respond, saying the Government was committed to leasehold reform, to making ‘it easier for leaseholders to buy their freeholds, extend their leases or exercise their right to manage buildings’ and also talked about the ongoing work to review greater use of Commonhold with the establishment of the Commonhold Council.

However, we can’t help but feel that we should be far further down the legislative road than we currently are, and that a number of key measures – as outlined above – appear to be in some kind of limbo, with no timescale in place and therefore no true way of knowing just how long it will take to following this most recent Ground Rent lead.

So, while it’s evident that some progress has been made, it’s up to the entire industry to keep on banging the drum for those key changes which are also required. Leasehold reform is not simply about ground rent – far from it – and while the Government might say this is a ‘long-term reform programme’ which takes time to implement, those most deeply impacted have been waiting a long time to get the reform they want and need, and to extricate themselves from the situation and costs not of their making.

For what is, by all accounts, a non-contentious issue, to be looking like you are pushing this into the long grass is not an outcome that can be acceptable to anyone who has seen the harm and stress inflicted on leaseholders. The time for action was some time ago; these people can’t wait any longer.

*Beth Rudolf is Director of Delivery at the Conveyancing Association (CA)