The bill aims to make it easier for leaseholders in England in Wales to extend their lease, take control over the management of their building, and buy their freehold.

It includes measures such as making it cheaper and simpler for existing leaseholders in houses and flats to buy their freehold; increasing lease extensions from 90 to 990 years for flats and houses, with ground rents reduced to £0; and banning the creation of new leasehold houses — excluding “exceptional circumstances” — so that each new house will be a freehold from the outset.

The bill will also up the 25% non-residential limit — which prevents leaseholders in buildings made up of homes, shops and offices, for example, from buying their freehold or taking over management of their buildings — to allow leaseholders in buildings with up to 50% non-residential floorspace to buy their freehold or take over its management.

The announcement was made after the Law Commission published its proposed measures in 2018, before issuing a final report in 2020.

Consequently, in June last year, the Leasehold Reform (Ground Rent) Act 2022 came into force, setting future ground rents to zero.

In his speech to the houses of parliament, the King said: “My ministers will bring forward a bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold, and tackling the exploitation of millions of homeowners through punitive service charges.”

B&C asked members of the specialist finance industry for their views on the proposed Leasehold and Freehold Bill and what impact it could have on the bridging market.

Laura Toke, bridging relationship director at SPF Short Term Finance, commented: “We view the proposals as a step in the right direction, given the issues with leasehold properties and the costs involved with extending leases.

“We hope that it may stimulate the purchase market and therefore have a positive impact on valuations and lender criteria when properties have less than 70-80 years left to run on the lease.

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“We see a segment of the market where clients utilise bridging finance to purchase a property with a short lease as mortgage lenders are not normally able to lend against these properties, and they are only available for cash buyers.

“We tend to raise bridging finance against these properties at a reduced LTV, and then the client is allowed some time to agree a premium with the freeholder in order to extend their lease.

“However, that being said, we do not see the potential leasehold reform as something which would negatively impact bridging business levels, as it should take a weight off leaseholders in the UK who have been plagued by huge fees to extend leases.

“Ultimately, it should make leasehold properties more popular with buyers, which is good for the market as a whole.”

Duncan Kreeger, CEO and founder of TAB, added: “Anything that gives power back to the real owner of the property is good in my view; spiralling ground rents have been a huge problem affecting both valuations and the cost of [meeting] ever-increasing annual rental payments.

“The relationship between the freeholder and leaseholder needs to be clear so that both sides understand who’s responsible for common areas, building works and utilities etc.

“Managing agents are getting better at using technology to streamline the process of day-to-day block management, and this should also continue to drive down the overall costs of leasehold property ownership."

Jonathan Samuels, CEO at Octane Capital, said: “Anything that makes it easier and cheaper for leaseholders to extend leases is positive and could result in an increase in purchases.

“The part of the announcement that is most exciting is the possible removal of the two-year restriction, which requires the leaseholder to have owned the property for two years before applying to extend.

“Overall, the bill may go some way to increase transparency on costs for lease extensions from 90 to 990 years, but it seems to miss the mark for leases that fall below 80 years.

“There was no mention in the speech about tackling the costs for leaseholders of sub-80-year leases, who are subject to paying 50% of the marriage value — the increase of the property’s value with the lease extended — plus the usual lease extension price.

“This amount can be significant, and the bill does not seem to address reform on that front, which is arguably where it is needed most.”