The Freehold and Leasehold Reform Act received Royal assent on 30 June 2022, but it can still not be properly interpreted until the secondary legislation is released by our current government. The Act is hugely significant to leaseholders, and its delay is costing leaseholders money by not providing the new calculations for valuing the premium which has to be paid to extend a lease. So why the delay?
The reasons currently being provided are:
1. Complexity of the Issues
• Freehold and leasehold reform is legally and administratively intricate, involving property law, contracts, and housing policy. Drafting legislation that balances the rights of leaseholders, freeholders, and other stakeholders often requires extensive consultation and careful consideration of potential impacts.
2. Consultation with Stakeholders and the Industry
• Governments typically engage with stakeholders, such as property developers, housing associations, legal professionals, and consumer advocacy groups, to refine the legislation. Feedback from these groups can lead to delays if significant concerns or disagreements arise.
3. Political and Policy Priorities
• Other political priorities may take precedence, diverting resources and attention from drafting the secondary legislation. The legislation was pushed through by the Conservative government on the day that parliament was dissolved to allow for the election. It's thought that a Labour government may have strengthened the legislation in favour of leaseholders. Now Labour has to adapt the secondary legislation into the main Act, which is more difficult than interpreting an Act that was written to its own agenda.
4. Technical Drafting Challenges
• Secondary legislation must align with primary legislation and existing legal frameworks. Ensuring clarity, consistency, and enforceability can take time, especially when creating detailed rules and procedures for implementation.
5. Legislative Scrutiny and Approval
• Secondary legislation often undergoes review by parliamentary committees or scrutiny bodies. This process can uncover issues that necessitate redrafting or delay implementation.
6. Economic and Market Considerations
• Reforms to leasehold and freehold systems can significantly impact the property market. The current government may delay legislation to assess economic risks, particularly during periods of market uncertainty, which we have certainly had in recent years. The legislation is certainly going to have an impact on the value of large freehold/ground rent companies whose shares are often, in part, owned by large pension funds.
Conclusion
It is obviously a very good thing that the Freehold and Leasehold Reform Act was passed into law as the reforms were clearly needed, but one has to ask why the Act was passed while the much needed secondary legislation was nowhere near ready. Let’s hope that the current government puts the resources into achieving the best possible result for leaseholders.