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In our previous article, Commonhold reform what draft bill tells us, we outlined the details of the draft Commonhold and Leasehold Reform Bill. At the time it was being examined by the House of Commons' select committee which included taking evidence from stakeholders. Its report at the end of May concluded that the draft bill makes a significant step towards giving leaseholders greater control of their buildings butadvised that several changes are needed.
What does the report say should change?
Ground Rent Cap
- Initial cap of £250 should start earlier, by late 2027 rather than the Government's timeline of 2028, with the commencement date two months after the act is passed
- Ensure the cap cannot be evaded such as by attributing a ground rent to related property like parking spaces or including similar charges in headleases
- Reduction to a peppercorn after 20 years instead of 40, with the committee asking the Government to justify the longer transitional period.
Regulation of managing agents
- Must be included in the legislation
- An independent regulator appointed with the ability to sanction rogue agents with penalties (including the removal of a licence to operate)
- Regulations must include retirement housing providers.
Enfranchisement
- Commonhold to be the default outcome for collective enfranchisement with leaseholders able to opt out by a 50% vote
- Non-consenting leaseholders to pay a share of the costs for a collective commonhold (including the premium, legal and other professional costs) if they choose to join the commonhold at a later date
- Freeholders required to disclose information about building safety with Government providing guidance on the format of the disclosure
- Correct the flaws in the Leasehold and Freehold Reform Act 2024 with implementation two months after the Act is passed
- Bring forward the Government consultation on the valuation rates used to calculate the cost of premiums
- Leaseholders given ability to avoid paying development value by agreeing a restriction on future development as recommended by the Law Commission.
Right to manage
- Include reforms of the right to manage process
- Give leaseholders a right to appoint their own managing agent as recommended by the Law Commission.
Commonhold
- The shared ownership homeowner and its provider to share the property's vote during the initial 10-year repair period
- Government guidance provided on the documents directors must issue for different types of votes including format and how much notice must be given before votes are taken
- Courts given discretion to waive some technical breaches of company law by the commonhold association.
Land Registry
- Government must invest in digitising systems for the Land Registry, making it more accessible and user-friendly to support the move to commonhold. The failure to modernise is seen as a risk to successful implementation.
Ban on leaseholds for new flats
- Should be introduced as soon as possible
- Exemptions for the retirement housing sector must be strictly limited.
Reserve funds
- Requirement to hold a reserve fund should be extended for all new and existing leaseholders.
What about implementation and timescales?
The report supports the plan to expand the Leasehold Advisory Service's remit to advise on commonhold but Government must provide funding to match the service expansion. Practical guidance must also be provided to promote awareness and understanding ahead of commonhold's implementation.
MPs believe the final bill should be introduced into Parliament in the autumn of 2026, with the second reading before the November recess, aiming for the act to be passed by mid-2027.
The committee requested a response to their report within two months. This timescale expired at the end of July.
Conclusion
The recent change to the cabinet seems to have temporarily slowed the publication of the Government's response but it is unlikely to have changed the desire to make the changes set out in the draft bill. It remains to be seen however whether there is an appetite to make the further changes urged by the committee.
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