Overview

This bill aims to protect leaseholders in England and Wales from unfair treatment when a landlord repossesses their property due to lease breach. It mandates that landlords account for the tenant's equity in the property before repossession, holding this equity in trust until it's paid to the tenant or their mortgage lender.

Description

The Leasehold Reform (Forfeiture) Bill requires landlords to calculate and account for a tenant's equity in a property before exercising a right of forfeiture or re-entry on a long lease (over 21 years). This equity is defined as the market value of the lease minus any outstanding debt to the landlord or mortgage lender, and permitted landlord costs.

Key aspects:

• Landlords must calculate the tenant's equity (Section 2) and provide written notice within 14 days (Section 2).
• They must account for this equity within three months of repossession, paying it to the tenant or their chargees (mortgagees) in order of priority (Section 3).
• Landlords are required to hold the equity on trust until it is accounted for (Section 4).
• Landlord's recoverable costs are capped at the lower of the actual costs incurred or 5% of the property's open market value (Section 5).
• Any attempt to contract out of the bill's provisions is void (Section 6).
• The Secretary of State can make regulations regarding notice delivery and tracing tenants (Section 2).

Government Spending

The bill is not expected to significantly increase or decrease government spending. Its primary impact is regulatory, shifting the balance of power and responsibilities between landlords and leaseholders in repossession scenarios.

Groups Affected

• Leaseholders: Benefit from increased protection of their financial interest in their property upon repossession.
• Landlords: Face additional responsibilities and restrictions regarding cost recovery during lease forfeiture.
• Mortgage lenders: Will receive their dues from the tenant’s equity before the tenant.
• Solicitors and legal professionals: Will be involved in processes related to equity calculations and distribution.

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