The King's Speech 2023: How This Impacts Leaseholders

What The King's Speech 2023 Means For Leaseholders

The King's Speech, delivered on 7th November 2023, carries significant changes for leasehold reform and leaseholders in England and Wales. The speech addresses the much-needed reforms to the leasehold system that we have been shouting in favour of for ages! It aims to make it cheaper and easier for existing leaseholders to gain security over the future of their homes. In this blog, MVN will delve into the key points from the speech and explain the impact it will have on leaseholders.

What is the Leasehold and Freehold Reform Bill 2023?

The Leasehold and Freehold Reform Bill 2023 has a direct effect on leaseholders, shaping their rights of redress and making it easier for existing leaseholders to gain security.

The key features outlined in the briefing notes to the King’s speech, are as follows:

• Cheaper and easier for leaseholders to extend their leases or buy their freehold
• Remove the requirement for leaseholders to have owned their interest for two years in order to extend their lease or acquire their freehold, and
• Further limit the mixed-used property exemption.

MVN have clients who could not put in a Right to Manage application because their internal floor space of the building which is residential did not meet the 75% threshold as the rest was commercial space. The new bill proposes to increase this to 50% therefore provided at least 50% of the internal floor space of the building is residential an RTM application can be submitted.

The bill aims to standardise the lease extension term from 90 years to 990 years, a substantial increase. This change is significant as it provides long-term security for leaseholders, offering them an extended lease period to enjoy their properties.

The Effect on Ground Rent Provisions

One of the key changes in these leasehold reforms is in the ground rent provisions. The reform brings about a significant shift in ground rent regulations, aiming to make it more favorable for leaseholders.

With ground rents already abolished for all new qualifying long residential leases, a consultation has now been launched regarding capping ground rents in all existing qualifying long residential leases (those which pre-date the recent Leasehold Reform (Ground Rent) Act 2022 (“GRA”) The purpose of this proposal is "to ensure that all leaseholders are protected from making payments that require no service or benefit in return, have no requirement to be reasonable, and can cause issues when people want to sell their properties".

This would prevent a two-tier system developing in residential leasehold properties between leases granted before and after ground rents were abolished.

Your Rights As A Leaseholder

In enhancing leaseholders' consumer rights, the proposed bill outlines comprehensive measures aimed at streamlining processes and fostering transparency within the leasehold property market.

The key provisions include:

1.  Expedited Buying and Selling of Leasehold Properties

There’ll be a new maximum time and free framework for when leaseholders wish to sell their properties. MVN has helped a great deal of our clients when their blocks are handed to us, as we can see the delays from some agents to complete LPE1 Management Packs and also the post completion requirements.  

2.  Transparency in Service Charges

To empower leaseholders with greater insight into the costs they incur, the bill commands transparency over service charges. All leaseholders will receive detailed, standardised, and comparable information regarding charges from their freeholders or managing agents. This provision enables leaseholders to scrutinise and challenge any charges deemed unreasonable.

3.  Elimination of Opaque Buildings Insurance Commissions

The bill addresses the issue of exorbitant and non-transparent commissions charged to leaseholders by replacing them with clear administration fees. This measure aims to eliminate hidden costs and ensure that leaseholders are not burdened with unnecessary expenses on top of their insurance premiums.

4.  Widening Access to Redress Schemes: Challenging Poor Practices

The law seeks to expand access to "redress" schemes for leaseholders, allowing them to challenge poor practices. More freeholders will be mandated to belong to a redress scheme, providing leaseholders with an avenue to challenge and address grievances effectively. The bill also abolishes the presumption that leaseholders must bear the legal costs of their freeholders when challenging poor practices. This ensures a fair distribution of legal responsibilities and prevents undue financial burden on leaseholders.

5.  Equal Rights for Freehold Homeowners

Extending rights equivalent to leaseholders, freehold homeowners on private and mixed-tenure estates will gain access to transparency regarding estate charges, support through redress schemes, and the ability to challenge charges by taking cases to a Tribunal. This ensures parity in consumer protection across different property ownership structures.

6.  Building Safety Act 2022 Integration

Building on the foundations laid by the Building Safety Act 2022, the bill ensures that freeholders and developers cannot evade their responsibilities to fund building remediation work. By extending and reinforcing the measures outlined in the Building Safety Act, leaseholders are safeguarded, and accountability is upheld in the face of building safety concerns.

In essence, these proposed reforms collectively aim to fortify consumer rights for leaseholders, fostering a fair, transparent, and accountable leasehold property market.

As a family business, we openly welcome the reforms the King's Speech 2023 has brought in. There’s still a long way to go but these changes stand as a beacon of empowerment for leaseholders - everything MVN stands for!

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