On 24 May 2024, the Leasehold and Freehold Reform Act (the "Act") was the last act passed in the current Parliament, and, quite possibly, by this Government. It was pushed through the Commons at speed to ensure it received Royal Assent before Parliament was prorogued. The debate of the House of Lords amendments started at 19:21 and 11 minutes later all 67 amendments were passed. Parliament was prorogued at 20:46.
It is striking that the Act grew from 65 clauses and 8 schedules to 124 clauses and 13 schedules during its passage through Parliament. That speaks to the complex and technical nature of the matter area; but equally raises questions about the scrutiny those amendments received.
In the course of the debate, Sir Peter Bottomly praised Michael Gove for "getting a grip of the horrors in residential leasehold." However, it remains to be seen whether the Leasehold and Freehold Reform Act and indeed Michael Gove's legacy will stand the test of time. The new Act's journey into the statute book has obvious parallels with the Landlord and Tenant Act 1987. The 1987 Act was also rushed through by a Conservative government three days before the dissolution of Parliament in the build up to the General Election of that year. It is widely regarded as one of the worst examples of legislative drafting and has a resulted in significant amounts of often unnecessary litigation for tenants and landlords alike. Unfortunately, there is scope for the new Act to go the same way.
Much of the commentary so far has focused on what is not in the Act. Michael Gove's plan to remove ground rent for existing leaseholders or cap it at £250 was the most high-profile absentee. However, the ban on forfeiture of long residential leases and the introduction of commonhold also ended up on the cutting floor.
So what now? The Act is, of course, not yet in force. The parts of the Act that amend the Building Safety Act 2022, and deal with rent charge arrears, will become law on 24 July 2024. The remainder of the Act (including the 990 year lease extension, the new 'standard valuation method' (which will make it less costly for leaseholders to extend their lease or buy the freehold), the tenant's right to buy out its rent, the ban on leasehold houses and the changes to service charge demands to make them more transparent) will be commenced by the Secretary of State via statutory instrument.
As Parliament is now in purdah, this responsibility will fall to the next government. The question of how the deferment and capitalisation rate should be fixed is complicated, politically charged and is highly likely to result in a human rights challenge. However, given the broad cross-party support for the Act, there is little doubt that the next government will grasp the nettle and bring the Act into force. When exactly this will be is anyone's guess. Perhaps the most realistic guide is Baroness Scott's 1 April 2024 written response, which estimated that the majority of the reforms would come into effect during 2025-2026.
In the interim, the leasehold enfranchisement industry remains in purgatory, although we now at least have an Act. For now, all we can do is work together to ensure that the new legislative landscape is understood as clearly as possible, so we are ready for the new Act when it becomes law.
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