Leasehold Bill: Reform plans reach the Lords
The Leasehold and Freehold Reform Bill finished its passage through the Commons this week, with yet more amendments tabled. Senior Campaigns and Public Affairs Officer, Eleanor Bateman, summarises the latest debate and outlines what may lie ahead.
The Leasehold and Freehold Reform Bill received its third reading this week, and will now proceed, significantly amended, to the Lords for further scrutiny.
The Bill’s last examination in the Commons was a relatively uneventful one, with very few MPs present to debate the latest round of tabled amendments.
Some MPs present did, however, express disappointment that the Bill has been ‘watered down’ by its many amendments (as an indication, the Bill now contains an additional hundred pages compared to when it was first introduced) – a sentiment echoed by many campaigners.
But in fact, it never did include an outright ban on leasehold, and even the ‘abolition’ of marriage value is a transfer of value to the leaseholder from the freeholder, as opposed to a removal.
According to the Secretary of State, Michael Gove MP, what the Bill does is create “LINO” – leasehold in name only.
What’s in and what’s out?
Thus far, the Bill has progressed relatively smoothly, but that may change now that it has reached the Lords – particularly since there are some hefty issues outstanding that the Government has indicated it still intends to deal with.
The Bill aims to improve fairness in the leasehold market and make it easier and cheaper to extend a lease or collectively acquire a freehold.
Recent amendments focus largely on improving access to redress, scrapping the presumption of leaseholder liability for freeholders’ legal costs, and bolstering sanctions for management companies that fail to ensure transparency of charges and costs.
But the Bill’s broader, practical impact, including whether it really will make it “cheaper and easier” for leaseholders to extend their leases, depends on secondary legislation that is yet to be drafted.
Moreover, despite eight government amendments tabled to resolve building safety issues, none rectifies the failings of the Building Safety Act to protect all leaseholders from liability for fixing historic safety defects.
Non-qualifying leaseholders remain excluded from cost protections, and it will be down to the Lords to ensure the matter is dealt with satisfactorily.
Neither does the Bill deal remove the issue of forfeiture – the loss of ownership of a property due to failure to comply with contractual obligations, for instance payment of maintenance charges.
The Minister, Lee Rowley MP, assured the House that the Government was “working through the detail of the issue”.
But this could mean further changes to the legislation in the Lords and debate around what alternative measures should be implemented in its place.
Freeholders of leasehold property may welcome interventions from Richard Fuller MP on deferment rates and marriage value.
The MP for North-East Bedfordshire pointed to the “substantial transfer of value from freeholders to leaseholders” and the “unquantified effects in the Bill’s impact assessment” in calling for the retention of marriage value on leases less than 80 years in length.
His amendment was not taken forward, however, and leaseholders will not be required to pay marriage value on lease extension, regardless of the length of lease.
The debate continues
If MPs had not discussed the matter enough, a Westminster Hall debate the following day saw many of the same topics re-examined.
The conversation did move on, however, to focus largely on ending the private estate model or ‘fleecehold’.
Under such schemes, purchasers of property find themselves liable for maintenance or rent charges irrespective of whether any maintenance is carried out.
According to the Competition and Markets Authority (CMA), around 40% of new builds in England, Scotland and Wales are on unadopted, 'fleecehold estates', yet the Bill does not prevent the practice. Another area for the Government to “go further on” when the Leasehold and Freehold Reform Bill has its second reading in the Lords – a date for which is yet to be determined.
