How the UK Government is Reforming Leasehold and Commonhold

Understanding the Leasehold and Commonhold Reform Bill

The UK Government has proposed a groundbreaking Bill to overhaul the leasehold and commonhold systems. This initiative aims to empower leaseholders, simplify property ownership structures, and professionalise the property sector.

What are Freehold, Leasehold, and Commonhold?

To navigate the property market in England and Wales, buyers need to understand these key terms:

• Freehold: Ownership of the property and land indefinitely.
• Leasehold: Ownership for a set period (e.g., 99 to 999 years).
• Commonhold: A shared freehold for properties like flats, introduced in 2002 but rarely used.

Most flats and some houses in England and Wales are leasehold, but this structure is becoming less popular due to high service charges and ground rents.

The Challenges of Leaseholding

Recent research by Propertymark highlights growing awareness of leaseholding issues:

• 72% of surveyed agents believe buyers are now more informed about leasehold pitfalls.
• 60% report buyers asking for lease details upfront.

The challenges include exorbitant service charges, ground rent, and complicated dispute resolution processes.

Key Changes in Leasehold and Commonhold Reform

The Leasehold and Freehold Reform Act, passed earlier this year, has already introduced pivotal changes:

• Restricted granting of long residential leases for houses.
• Simplified the process for tenants to buy their freehold or extend leases.
• Reduced rent payable under leases to a nominal ‘peppercorn’ rate.

The proposed Leasehold and Commonhold Reform Bill takes this further:

• Modernising commonhold frameworks for better management and dispute resolution.
• Enhancing leaseholder rights to extend leases, buy freeholds, and manage buildings.
• Regulating ground rents for existing leaseholders.
• Strengthening protections for freehold homeowners on mixed-tenure estates.

The Role of Qualifications in the Property Sector

The government is also consulting on requiring qualifications for property agents. This move could weed out rogue agents, boost professionalism, and enhance consumer trust.

What Industry Experts Are Saying

Timothy Douglas, Head of Policy and Campaigns at Propertymark, says:

"We welcome reforms that strengthen consumer protections and make property transactions smoother. Professionalising the property sector through qualifications is a step in the right direction."

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