Michael Gove is confident The Leasehold and Freehold Reform Bill will soon be passed in a “landmark moment for millions”.
He continued to say that the unveiling of new laws in England and Wales would "slash unfair costs and crack down on exploitation".
Such reforms, which prior Housing Minister Rachel McLean assured in May would be enforced, will make it easier for leaseholders to purchase their freehold, sell their properties and extend their lease.
At present, there are around 4.98 million leasehold homes in England, of which 30 per cent are houses and 70 per cent are flats.
The percentage of new-build houses sold as leasehold reached a peak of 15 per cent in 2016 and the proportion fell from there. In December, 2022, it was less than 1 per cent.
"Of course what we need to do is make sure we phase out leasehold over time altogether," Mr Gove told the BBC.
What is the leasehold reform?
Leasehold reform was included in the Law Commission’s 13th Programme of Law Reform in 2017 as a way to tackle the growing number of newly built houses sold as leasehold instead of freehold.
In the King's speech, it was announced the new bill will ban the creation of leaseholds for new houses, but not flats, the decision north London estate agent Jeremy Leaf has suggested will come as a massive blow to flat owners.
He said: "While we welcome a ban on new leasehold houses, it is disappointing that flats are not included in the legislation, as we wanted to see new and existing flats and houses included.
"Indeed, flat owners and those considering buying flats are looking for change as much as those purchasing houses, particularly given that flat owners often also have cladding issues to contend with.
"It’s no surprise that many are thoroughly fed up with everything," he added.
However, the new reform will see an extension to the standard lease term for both houses and flats which is to increase by over a tenfold from 90 to 990 years. Ground rent is to also be reduced to £0.
This means that people can get 1045 years after the extension should they currently have 55 years on their lease; this is instead of the 145 years they would have under existing legislation.
What does the reform include?
Under current legislation, leaseholders pay hefty maintenance costs and ground rent.
However, according to the UK Parliament website, future legislation will:
- Reform the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
- Abolish marriage value.
- Cap the treatment of ground rents at 0.1 per cent of the freehold value and prescribe rates for the calculations at market value. An online calculator will simplify and standardise the process of enfranchisement.
- Keep existing discounts for improvements made by leaseholders and security of tenure.
- Retain the separate valuation methodology for low-value properties known as “section 9(1)”.
- Give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”.
- Allow for redevelopment breaks during the last 12 months of the original lease, or the last five years of each period of 90 years of the extension to continue, “subject to existing safeguards and compensation”.
- Enable leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term.
