(More) Leasehold reform

After last week’s glut of posts, I promise that there will be just one this week.  It comes in the context for me of writing about the way in which housing law and housing policy actors quite often talk past each other.  One way in which they do so is when they talk about tenure.  There is a lengthy debate in housing policy literature about ownership and the construction of home.  We are often told that owners feel more “ontologically secure” than those in other tenures, for example.  That kind of discussion and its critiques make little sense to a housing law actor, and, as it happens, makes little sense when one recognises that there are different types of ownership (without/with a mortgage, freehold, leasehold).  Leaseholders, if they were unaware, rapidly recognise that they have obligations to freeholders and/or those with superior title to them, paying ground rent, service (and other) charges and at risk of losing everything through legal processes (forfeiture).  There have been lots of examples over the years of abuses of these provisions in leases, and, as a result, lots of law which seeks to ameliorate those abuses or level what is an unequal playing field into which a leaseholder comes.  That law is often just incredibly complex.  And, then, there is devolution by which property law remains with the Westminster government.  That seems to mean – or is accepted as meaning – that short-term rental housing rents and security are non-reserved, but long leasehold is reserved activity.

The Westminster government has published a draft Bill for leasehold reform which will affect Wales, a guide and explanatory memorandum, and a policy statement “addressing unregulated and unaffordable ground rent”.  All these documents can be found here.  This Bill follows on the 2024 Act (passed in the wash-up before the general election) about which I have commented previously.  I have to say that lawyers might quibble with the characterisation of leasehold as being feudal (I’ve called it that before, even when teaching, but think it is inaccurate).

The ground rent provisions address the problem of existing leaseholds (only a peppercorn can be charged on leases entered into after the Leasehold Reform (Ground Rent) Act 2022.  And the intention is to cap those rents at £250 for 40 years after which they will be peppercorn.  That has not gone down well with landlord organisations, and clearly affects freedom of contract principles etc.

Part 1 sets the legislative framework for commonhold (in 108 sections and six schedules).  This is going to be quite complex stuff.  My personal view is that anybody who thinks that commonhold will ameliorate the issues they face is likely to be disappointed – it will displace those issues but they will remain.

By Part 4, the Bill will abolish forfeiture (rightly) creating a new category of “leasehold enforcement claims” in relation to long leaseholds (which I am delighted to see include shared ownership leases: cl 139(3)(f)).

The Bill is 363 pages long, the ground rent provision being just one clause.  There is a lot there, and it will be scrutinised by Parliament.  Whether long leaseholders will feel more like owners after it comes into force will be an interesting question.  I doubt it but am always sceptical about these kinds of things.