Previous changes to leasehold legislation banned ground rents for most long residential leasehold properties in England and Wales. This Act made changes in two areas under the banners of: “Empowering homeowners” and “Improving consumer rights for leaseholders and homeowners”.

The Act has many parts, not all of which relate to housing associations and their operations. This briefing concentrates on the new rules which directly impact members’ work. Uncertainty remains about how and when the new rules will be implemented. We will provide details when the government makes a further announcement.

As well as guidance on the operation of the new legislation, the new government has also signalled their intention to bring forward further changes to leasehold and freehold. A new Leasehold and Commonhold Bill was announced during the King’s Speech this summer. We will provide a full briefing on proposals when further information is available.

In the meantime, if you have any questions please contact me, marie.chadwick@housing.org.uk, Policy Lead

Empowering Homeowners

As well as banning the sale of new leasehold houses, the new legislation makes it easier for existing leaseholders in both houses and flats to extend their lease or buy their freehold.

As expected after the introduction of the new model for shared ownership, this legislation has increased the standard lease term from 90 years to 990 years for both houses and flats. Ground rent is also reduced to a peppercorn and marriage value is abolished.

Alongside this, shared owners (and leaseholders more generally) will no longer be required to have owned their property for two years before they can extend their lease.

This means that when the new rules come into force, shared owners will be able to apply to their housing association to extend their lease. It is expected that the rules will dictate that at this point the housing association will be required to automatically grant the extension to whatever’s left of the 990-years so that the resident doesn’t have to go through the process more than once.

Secondary legislation is expected to give more detail on the process and what costs and responsibilities each party in the extension will have. It is likely that charges will need to be kept to a minimum and landlords will be prevented from making leaseholders pay their legal and valuation costs. The abolition of marriage value means housing associations who have been collecting it as part of a lease extension will no longer be able to do so.

Improving consumer rights for leaseholders and homeowners

This section of the legislation as it relates to housing associations mainly concerns the way service charges operate. A lot of the detail is still to be worked out through secondary legislation which we will respond to as it comes forward.

Measures in the Act are aimed at driving up the transparency of information that leaseholders and tenants receive. The NHF has consistently made the point that housing associations already seek to ensure that residents are well-informed about what their bills represent.

A move towards standardising the presentation of service charges and publishing annual written statements of accounts which set out proposed works over the following 12 months are due to be introduced. In our response to the proposed legislation, we sought to explain the trade-offs that exist between getting value for money for residents through group purchasing for services and how sometimes this has made it more difficult to extrapolate specific costs for individual residences. We will continue to make this point as the regulations are worked through.