news | 1 month ago | Mark Wilson, member of Association of Leasehold Enfranchisement Practitioners (ALEP), and director of Myleasehold

Measuring the success of The Leasehold and Freehold Reform Bill

Residential leases in England and Wales will face significant change when the Leasehold and Freehold Reform Bill is enacted.


The legislation may have been a long time coming, but the speed with which the government has pushed the bill through Parliament suggests that ministers are keen to get the reforms on the statute book before the general election.

Despite the fact that the bill has already passed each of its stages in the House of Commons, the government seems to be dumbing down on original commitments made in the King's Speech in November last year.

Before the bill passes through the Lords and is enacted, I believe the current form of the legislation should be assessed against its original aims and objectives.

The fundamental objective of the legislation at its first reading was to create a fairer and more balanced leasehold system that benefits both leaseholders and freeholders. The bill sought to make it easier and cheaper for leaseholders to extend their lease or buy the freehold. Furthermore, it committed to reducing the burden of service charges, giving leaseholders more control over the management of their building, banning new leasehold houses and protecting leaseholders from unreasonable ground rents.  

I believe that for the reforms to be worthwhile, most or all of the benchmarks outlined below should be achievable:

1. Improved availability and choice of mortgage finance

For this, it’ll be key to look at whether lenders will offer mortgages on shorter leasehold properties (under 80 years), and if they will become more comfortable financing these properties than before. It will be interesting to see if we will see a change in the availability of specialist "leasehold rescue" mortgages aimed at helping leaseholders extend their lease or buy the freehold. 
Also, will there be a change in the average LTV ratio offered on mortgage products for leasehold properties, and will we see new mortgage products specifically designed for leasehold properties?

2. Improved ease and saleability of sale of flats

To measure the success of this, it’ll be key to look at whether there will be a decrease in the number of leaseholders trapped in unsellable leasehold properties due to onerous lease terms. Also, will flats, as an asset class in their own right, have greater appeal and investment value?

3. Number of lease extensions 

Will the volume of lease extensions increase, and the time taken to enfranchise reduce? This is something else to consider to measure the success of the bill.

4. The standard of building management and maintenance 

It will be important to watch if, following the bill implementation, we will see an improvement of building management and maintenance, resident experiences with property management, communication and of the overall living environment.

Keeping track of the reduction in costs lessees must pay in service charges, of how many leaseholders will still experience financial hardship due to service charges, and of how many empowered leaseholders will participating in resident management companies or associations is also essential to measure the success of the bill.

5. Reduction in disputes 

Following the implementation of the bill, will disputes between landlord and lessee reduce? Also, will we see an increased proportion of leaseholders winning those tribunal cases which do occur? These are points that will need to be considered when evaluating how beneficial and successful the bill is.

You win some, you lose some

Furthermore, it is important to accept that the Leasehold and Freehold Bill is not a win-win situation — in this case, can the tribunal service cope with the potential disputes that could arise?

Also, if several freeholders become insolvent, or if lessees are unable to secure insurance at an affordable price, will the government be able to step in with emergency funding or under writing — and if not, who will?

Demonstrating that the majority of these benchmarks can be achieved is vital as the legislation completes its final stages in Parliament because for every benchmark that appears unattainable, the likelihood of the legislation failing to reach its aims is increased.
 

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