What Is the Leasehold and Freehold Reform Act?

September 13, 2024

The Leasehold and Freehold Reform Act 2024 became law in May this year. However, although it has secured Royal Assent, the provisions are yet to come into force.

The changes that will be made under the act are likely to come into effect in the next couple of years.

The changes will provide leaseholders with more rights and make it easier to extend their lease.

In this article, we discuss some of the key changes to be introduced under the Leasehold and Freeform Act 2024.

While we hope this will be helpful, it should not be taken as legal advice. If you need any further support, our property solicitors will be happy to support you further.

To speak to one of our experts, please contact us today by calling 0800 1584147, emailing info@tayntons.co.uk or requesting a call back.

Key changes under the Leasehold and Freehold Reform Act 2024

Key provisions of the Act include:

• Banning the sale of new houses on a leasehold basis, except in very specific situations.
• Extending the standard term for lease extensions to 990 years for both houses and flats.
• Removing the two-year waiting period before leaseholders can apply to extend their lease or buy their freehold.
• Lowering the costs of leasehold enfranchisement by eliminating the requirement for leaseholders to cover the freeholder’s costs in most cases.
• Allowing leaseholders to buy out their ground rent without needing to extend their lease.
• Changing the calculation method for leasehold extensions which is expected to lower costs for most leaseholders, although some costs may rise since the new rates haven’t been finalised.
• Removing the ‘marriage value’ charge for leaseholders extending leases with less than 80 years remaining.
• Enhancing transparency around service charges by requiring freeholders or their agents to issue standardised bills and year-end reports on major planned works.
• Expanding eligibility for the statutory ‘Right to Manage’ to include buildings with up to 50% commercial space.
• Requiring freeholders who manage their buildings directly to join a redress scheme.

Please note that some of the changes above do not apply to flats.

What does this mean for people planning to extend their lease?

As things stand, the law has not changed for people wanting to extend their lease. The question of whether to seek a lease extension now, under the current rules, or wait until the new rules come into force will largely depend on whether leaseholders qualify for a statutory lease extension under the current rules and how long they have left on their lease.

For those who do not qualify for a statutory lease extension under the current rules (e.g. because they have owned their property for less than two years), then it will likely make sense to wait unless they can negotiate a voluntary lease extension with their landlord on favourable terms.

If you have the right to a statutory lease extension and have fewer than 80 years left on your lease, it will likely make sense to wait for the reforms to kick in so you avoid paying marriage value. If you have more than 80 years left on your lease, then it might make sense to wait so you can benefit from the right to extend your lease by up to 990 years (up to 90 years for flats under the current rules). However, there is the risk that your lease extension could be more expensive under the new rules, so this must be considered.

It is strongly recommended that you speak to a leasehold property expert before deciding whether to extend your lease now or wait for the new rules to take effect.

What does this mean for people who want to buy their freehold?

If you wish to buy the freehold on your property, then it may be worth waiting until the new rules come into force, as you will be able to avoid paying your freeholder’s costs. However, it is worth discussing this with a leasehold enfranchisement expert so you are clear on your position, taking into account your particular circumstances.

What does this mean for freeholders and managing agents?

Freeholders and managing agents will need to be ready to comply with the new rules once they come into force, for example, by ensuring they can provide the necessary standardised bills and year-end reports. It would be sensible to start preparing now so as to avoid being caught off guard when an implementation date is set for the new rules to take effect.

Get in touch with our property law solicitors

Looking for legal advice and support with leasehold property in Gloucester, Cheltenham, the Forest of Dean or anywhere in Gloucestershire?

Please contact our property law solicitors today by calling 0800 1584147, emailing info@tayntons.co.uk or requesting a call back.