The Building Safety Act 2022 has caused developers to look back to their previous developments and consider risk. Many will (or at least should) be redoubling remediation efforts following the publication of the Government's Remediation Acceleration Plan on 2 December. As the Government pushes the accelerator on leasehold reform, developers will need to keep their eyes on the road ahead too.  With 990-year leases being very much the direction of travel, developers must ensure that leasehold ownership structures can accommodate them.

Longer leases for tenants have been a priority in the shared ownership space for some time.  The minimum term for shared ownership homes funded under the Affordable Homes Programme 2021 to 2026 is a minimum grant of a 990 year lease. Where there is a shared ownership element to a development, developers are already aware of the need for them to be granted a headlease with a term of well over 1200 years to enable 990 year leases to be granted long into the future.  Recent experience is that freeholders (particularly local authorities) are seemingly loath to grant these longer leases. They need to understand that there is good reason for such a request as a developer (and moreover their funder) will want to allow themselves a considerable buffer for planning, construction and the new BSA gateway process, amongst other things. Offering 999 year leases is simply not long enough.

Why are freeholders worried about this? They may simply fear that the developer's long leasehold interest might someday be enlarged (pursuant to section 153 of the Law of Property Act 1925) into a freehold interest but this issue can be largely mitigated by the inclusion of a right to forfeit.

Even for developments where shared ownership is not envisaged as part of the proposed tenures, developers would be wise to negotiate as long a headlease term as possible, as the Government is clearly keen to give leaseholders a level of security more akin to a freehold. That will cause problems for landlords, faced with requests for lease extensions, in existing developments. Section 33 of the Leasehold and Freehold Reform Act 2024 obliges a landlord to extend the term of a leasehold house or flat for 990 years from the expiry of the existing term.

The section is not yet in force but its high of the Government agenda.  In shared ownership, the Government acknowledges that leases dating back to the late 1970s, granted for a term of 99 years, will by now have unexpired terms that make them difficult to sell or remortgage. Shared ownership leaseholders have no statutory right to an extension, but landlords are strongly encouraged to grant lease extensions voluntarily.  The problem is that many existing immediate headlease terms will not be long enough to enable the immediate landlord to grant these extensions. Many developers will have only been granted 250 year headleases in the recent past.

Matthew Pennycook, the Minster of Housing, Communities and Local Government seems alive to the issue, albeit in relation to shared ownership. In his statement on 21 November 2024, and speaking of the changes introduced by the previous government in the LFRA 2024, he said "… we must correct an omission that would deny tens of thousands of shared ownership leaseholders the right to extend their lease with their direct landlord given that the providers in question do not have sufficiently long leases to grant 990-year extensions."

For existing developments, the Government is in therefore in the driving seat.  It must either grant developers with shorter headlease terms an exemption or find a workaround which facilitates the grant of the extension to the leaseholder by other superior landlords or the freeholder.

Practically, until then, developers should be alive to the 990 year lease problem and be future proofing their land interests rather than waiting for any Government to get this right.