The Leasehold and Freehold Reform Bill 2023 – what’s in it for freeholders?

If you are the owner of a leasehold property, you may be following the progress of the much-awaited Leasehold and Freehold Reform Bill 2023. The proposed legislation, which is making its way through Parliament and is expected to receive Royal Assent this year, has been touted as “part of the most significant reforms to the leasehold system for a generation.”

As well as many long-overdue reforms for leaseholders, including the right to longer lease extensions, more transparency over service charges and the abolishment of the ‘marriage value’ charge, the legislation is also set to introduce some changes for freeholders, too.

Protecting freeholders from unfair estate charges

Many owners of new-build freehold homes are often surprised to find that they are subject to an estate charge, which is essentially a contribution to the upkeep of communal areas (for example, repairs and maintenance of lawns, playgrounds, communal gardens, etc.) including the upkeep of unadopted roads and ways within the estate.  Just like a leasehold service charge, the fee is not designed to pay for repairs to your or others’ individual properties, only parts of the estate all residents share.

This charge is usually paid to a management company who is contracted by the estate developer, similar to how the freeholder of a block of leasehold flats would hire a management company to collect a service charge. Unlike leasehold owners, however, freehold homeowners have very limited legal rights when it comes to the cost or quality of the services provided.

Unlike leasehold owners, they do not currently have the right to:

• Challenge unreasonable estate charges or poor standards of work by applying to a First-tier Tribunal
• Apply to a First-tier Tribunal to appoint a new manager
• Take over the management of the estate in the form of a Right to Manage (RTM) company.

At the moment, freehold owners are very much reliant on the estate charge provisions outlined in their Land Registry title, or TP1, which are usually far more geared towards the needs of developers and management companies. The usual stance of developers and their conveyancing lawyers is that these template estate charge provisions are fixed and cannot be amended.

How will the legislation change this?

The Leasehold and Freehold Reform Bill proposes that freeholders be given the same rights regarding the transparency and reasonableness of estate charges as leaseholders currently have over service charges. Subject to Royal Assent, it is hoped that owners of freehold houses will soon have the legal right to challenge unfair estate charges through a Tribunal.

Until that happy time, however, the current law still stands; in the meantime, freeholders should contact their solicitor to discuss their options if they are unhappy with their estate charges.