What is the Leasehold Reform Act?
June 12, 2024

The Leasehold and Freehold Reform Act 2024 received royal assent at the end of May, the latest in a series of changes to English property law that the government hopes will make home ownership fairer and more secure.

Although the Act is not yet in force, when it does become law, the Leasehold Reform Act will introduce several important changes for leaseholders and its impact could prove far reaching.

In this blog, our experienced Leasehold Solicitors look at the key points of the Leasehold and Freehold Reform Act 2024 and consider its main implications for leaseholders.

What is the Leasehold and Freehold Reform Act 2024?

The Leasehold Reform Act is the second part of a legislative package to reform leasehold law. It follows on from the Leasehold Reform (Ground Rent) Act 2022, which ended ground rents for most new residential leasehold properties in England and Wales.

In what was dubbed the “biggest reforms to English property law in 40 years,” the government hoped to give homeowners more rights, power and protection over their homes by changing how leasehold properties were owned and managed.

What is the difference between leasehold and freehold?

If you own a freehold property, you own the building and the land it stands on. For freehold, there is no time limit to the ownership period.

However, leasehold properties are different. As the owner of a leasehold property, you are only the owner for a fixed term and do not own the land on which the property stands.

The ownership of the leasehold property can revert to the freeholder when the lease expires, unless there is an agreement to extend or purchase the lease (known as enfranchisement).

The enfranchisement process has been criticised for being complex, inconsistent and costly. A consultation into leaseholders’ rights was commissioned with a view to introduce new legislation that would make extending a lease simpler, fairer and cheaper.

What does the Leasehold Reform Act mean for leaseholders?

The Leasehold and Freehold Reform Act 2024 will strengthen consumer rights for homeowners by:

  • Making it cheaper and easier for people to extend their lease or buy their freehold so leaseholders pay less to have more security in their home.
  • Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats), so leaseholders can enjoy secure ownership without the hassle and expense of future lease extensions.
  • Giving leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged.
  • Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
  • Making it cheaper for leaseholders to exercise their enfranchisement rights as they will no longer have to pay their freeholder’s costs when making a claim.
  • Extending access to redress schemes for leaseholders to challenge poor practice.
  • Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee for home buying and selling information.
  • Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.

In addition, the Act will ban the sale of new leasehold houses other than in exceptional circumstances, end excessive buildings insurance commissions for freeholders and managing agents, and scrap the requirement that a new leaseholder own their house or flat for two years before they can buy or extend their lease.

The Act also helps more leaseholders take over the management of their property if they want to. For example, leaseholders in some buildings are barred from taking over the management of the site or buying its freehold if more than 25% of its floor space is commercial. However, this limit will now be increased to 50% to enable more homeowners to access the right to manage or the right to collective enfranchisement.

Does the Leasehold Reform Act say anything about ground rents?

Ground rent is paid by owners of leasehold properties on top of their mortgage, with many leaseholders facing high charges and unexpected increases which makes homes difficult to sell.

However, despite hopes that the Act would include a provision to remove ground rent for existing leaseholders or cap it at £250, these plans were dropped.

When will the Leasehold Reform Act become law?

When the Leasehold Reform Act will come into force depends on the results of the upcoming general election on 4 July.

If the Conservatives retain power, it is expected that most reforms will come into effect in 2025 and 2026.

Leasehold reform also looks set to continue under a Labour government. In May 2024, Shadow housing minister Matthew Pennycook said his party would “finish the job of finally bringing the archaic and iniquitous leasehold system to an end,” according to a BBC report.

I’m thinking of extending my lease on my house, should I do it now or wait?

If you are a leaseholder considering extending your lease, whether you should undertake the process immediately or delay the process depends on a variety of factors.

Specialist advice from a solicitor with experience in lease extensions is vital to ensure you understand your options and make the right decision based on your circumstances.

Lease Extension Solicitors Cambridgeshire

At Bowsers Solicitors, our specialist property solicitors understand the stressful nature of lease extensions and can advise you of your rights and the most appropriate steps to take when extending or purchasing a lease.

We have assisted clients across the Fens and further Cambridgeshire for decades.

If you need legal advice on lease extensions, enfranchisement or want guidance on how the Leasehold and Freehold Reform Act will affect you, our leasehold solicitors can help.

Our leasehold legal services include:

  • Reviewing of, and advice regarding, the terms of a new lease.
  • Advice regarding the documents prepared by the freeholder.
  • Requesting the other party for amendments to any documents.
  • Conveyancing on the new lease.

If you are looking for advice about a lease extension, please contact our experienced property solicitors and chartered legal executives today on 01945 583194 (Wisbech) or 01354 652606 (March), or email reception@bowsers.co.uk.

Alternatively, you can fill in our contact form.