The history of leasehold reform in the United Kingdom reflects a series of legislative measures aimed at addressing issues and imbalances in the relationship between tenants and landlords.
Leasehold Reform Act of 1967
The 1967 Act introduced with the purpose of enabling tenants of houses held on long leases at low rents to acquire the freehold or an extended lease, was a response to the expiration of 99-year leases for homeowners in South Wales.
Landlord and Tenant Act 1985
The 1985 Act marked another important step in leasehold reform by granting rights regarding service charges. This legislation ensured that only reasonable service charges were payable by tenants and gave them the right to information about these charges. The aim was to prevent tenants from facing unreasonable financial burdens related to services provided by landlords.
Landlord and Tenant Act 1987
The 1987 Act expanded tenant rights by offering certain tenants the first opportunity to purchase the freehold. Additionally, tenants gained the right to compulsory purchase landlords' interests in specific circumstances, further rebalancing the power dynamic between landlords and tenants.
Commonhold and Leasehold Reform Act 2002
The 2002 Act represented a comprehensive reform, extending rights for leaseholders. Among its provisions, the act relaxed qualifying rules for purchasing the freehold of a leasehold property. It also prevented landlords from forfeiting leases due to trivial debts and introduced the concept of commonholds.
Commonholds
Commonholds, introduced by the 2002 Act, were designed to replace long leaseholds. This innovative concept allows individuals to own the freehold of individual flats, houses, and non-residential units within a commonhold association and community statement. However, despite their potential benefits, commonholds have not been widely adopted, primarily due to a lack of incentives for developers and the absence of continued income streams for them.
Current Reform Effort
Despite past legislative efforts, leasehold arrangements continue to face criticism for the power imbalance between tenants and landlords. Concerns include landlords charging unreasonable fees for alterations, building defects, forfeiture rights, and legal costs. The Department for Communities and Local Government responded to these issues in its 2017 report. The report proposed prohibiting new residential long leases on houses, discouraging the use of help-to-buy shared equity loans, and encouraging developers to provide compensation schemes to leaseholders facing onerous ground rents.
In summary, the history of leasehold reform in the UK reflects an ongoing effort to strike a fair balance between the rights of tenants and landlords, with each legislative milestone addressing specific concerns and evolving to meet the changing dynamics of property ownership.
You can learn more about this topic with our Land Law notes.
