Does The New Labour Government Mean The End Of Leasehold Properties For Good?

The Leasehold and Freehold Act 2024 was snuck through before Parliament was dissolved.  It received Royal Assent, so it is legislation.  However, we do not have any implementation dates, and will not have them, until a new Secretary of State is appointed. This means that we could not have any implementation dates until 2025 or 2026.

The new Act has the following provisions:

• Lease extension will be granted for 990 years (as opposed to 90 years under the 1993 Act);
• Marriage value will no longer be payable;
• The valuation method for calculating how much a lease extension will cost has changed. However, not all rates are known and government have not issued any guidance to RICS, so surveyors are still in the dark.  This may require secondary legislation;
• Both parties will pay their own costs (when following the statutory route);
• The Act removes the requirement for the leaseholder to have owned the property for a period of two years.

So the news is a mixed bag.  Yes, we have the changes that many were seeking, but, the Act has not yet taken effect.  The new Secretary of State would need to prepare a commencement order, prepare the regulations and secondary legislation needed and set the deferment and capitalisation rates needed to allow the new valuation formula to work.  If the rates are set at a certain percentage level, there may be little or no marriage value saving.

Labour have called the leasehold system a ‘feudal system’ and have said the following: “Labour will act where the Conservatives have failed and finally bring the feudal leasehold system to an end. We will enact the package of Law Commission proposals on leasehold enfranchisement, right to manage and commonhold. We will take further steps to ban new leasehold flats and ensure commonhold is the default tenure. We will tackle unregulated and unaffordable ground rent charges. We will act to bring the injustice of ‘fleecehold’ private housing estates and unfair maintenance costs to an end.” So, the new Labour Government could go even further than the Conservatives did, and adopt more recommendations from the Law Commission’s report on enfranchisement.

A commonly accepted view is that leasehold will not be abolished entirely, as we have a wealth of existing leasehold properties, but it is suspected that Labour may introduce legislation banning new leasehold flats and houses. They may also introduce new legislation to tackle unregulated ground rents; there have been calls for onerous ground rents in existing Leases to be regularised, for example existing Leases where the ground rent doubles or is reviewed in line with RPI.

There is also the question of whether existing freeholders will seek to challenge the new Act, under the Human Rights legislation, which could mean that aspects of the new Act are held up by Court challenges.

The King’s Speech is tabled for the 17 July 2024, and we should then find out more as to what the new Labour Government has in store……

Please note the above is for information purposes only and is intended to be a short summary. It should not be treated as a comprehensive guide and should not be acted on without qualified legal advice.