Leasehold Reform is here (sort of) – the Leasehold and Freehold Reform Act 2024
06 Jun 2024
Andy Finkel
Real Estate, Residential Property
The Government previously suggested that they were aiming to bring most reforms into effect in 2025-2026, but ultimately that will depend on the speed with which complex secondary legislation can be implemented. Also, it depends on the priority which the new government (whoever that may be) will give to implementing the Act after the election.
The Leasehold and Freehold Reform Act 2024 was enacted on 24th May 2024 as part of the “wash-up” prior to dissolution of Parliament in the run up to next month’s election.
Key reforms under the Act include:
- Making it cheaper and easier for people to extend their lease or buy their freehold (exercising their enfranchisement rights)
- Increasing the standard lease extension term to 990 years for houses and flats
- Removing the requirement for a new leaseholder to have owned their house or flat for 2 years before they can compel their landlord to extend the lease
- making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged by leaseholders
- Removing barriers for leaseholders to challenge their landlords’ unreasonable charges at the tribunal.
- Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
- With limited exceptions, compelling new houses to be sold as freeholds rather than leaseholds.
However, it cannot be accurately forecast WHEN these reforms will come into effect.
The Act did not grasp the thorny nettle of whether ground rents under leases should be abolished, reduced to “a Peppercorn”, capped at £250 per annum, capped at 0.1% of the market value of the property, or left as stated in the actual lease.
The price payable to extend a lease will include calculations of capitalisation and deferment rates to be set by Statutory Instrument (i.e. set by a government minister) and reviewable every ten years. The levels at which these rates are set will significantly affect the premium payable, but until the statutory instruments containing these rates are passed, we will not know the practical effect of the new Act on lease extension premiums.
Whilst meaningful leasehold reform COULD be in effect by next year, this cannot be guaranteed. Until then, anyone wishing to extend their lease or enfranchise must rely on the current law and valuation principles.
Essentially, the government has, as promised, delivered a tin of goodies for leaseholders, but has not yet invented the tin opener.
For more information please contact Andy Finkel at Andy.finkel@haroldbenjamin.com