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The Leasehold and Freehold Reform Act: What you should know

The Leasehold and Freehold Reform Act became law on 24 May 2024 – it was the very last bill passed during the so-called ‘wash-up’ period, after the general election had been called.

The Act, which is the second part of a legislative package to reform leasehold law, is aimed at addressing longstanding issues that owners of leasehold houses and flats have faced, giving them more rights, power and protection over how leasehold properties are owned and managed.

Here’s everything you need to know about the Act’s impact on the leasehold landscape.

What is covered by the Leasehold and Freehold Reform Act?

The Act is intended to reform the leasehold system by introducing fundamental changes to the valuation methodology and legal process with a view to allowing leaseholders to extend their leases and buy their freeholds in a way that is cheaper, easier, fairer, and more transparent.

This will be achieved by:

  • Banning the sale of new leasehold houses so that every new house in England and Wales will be freehold from the outset, unless there are exceptional circumstances
  • Making it cheaper and easier for people to extend their lease or buy their freehold
  • Offering more secure ownership by increasing the standard lease extension term to 990 years for houses and flats
  • Providing greater transparency over service charges
  • Making it easier and more affordable for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice
  • Making it less costly for leaseholders to exercise their enfranchisement rights
  • Enabling leaseholders to challenge poor practice by extending access to redress schemes
  • Making the process of buying or selling a leasehold property quicker and easier by setting a maximum time and fee
  • Granting homeowners on private and mixed tenure estates comprehensive rights of redress
  • Removing the requirement for new leaseholders to have owned their property for two years before they can extend their lease or buy their freehold
  • Excluding ‘marriage value’ when calculating the premium on lease extensions
  • Replacing unclear and excessive buildings insurance commissions with transparent and fair handling fees

What is excluded from the Act?

Although the Act aims to make it cheaper and easier for people to extend their lease, buy their freehold and take over management of their building, plans to remove ground rent for existing leaseholders or cap it at £250 have been dropped.

Additionally, although the Act was expected to make commonhold the default tenure for flats, new flats will remain leasehold by default.

Several amendments aimed at resolving the unfairness of the Building Safety Act were also not included.

Finally, the Act does not incorporate any amendments to the current law of Commonhold, which has been widely touted as an alternative to leasehold.

When will the Act come into force?

From 24 July 2024, a handful of amendments to the Building Safety Act and provisions around arrears for rent charges will apply. However, the majority of the Act’s provisions will not come into force without secondary legislation, which will be the task of the next Government.

Legal help for leaseholders

The Leasehold and Freehold Reform Act promises to bring significant change. However, it may also hold some challenges for leaseholders. Navigating these requires knowledge and expertise.

If you are considering extending your lease, looking to sell your property, or are reviewing your portfolio in light of the Act, Wilkinson Woodward’s experienced leasehold professionals are on hand to provide expert legal advice and support to ensure that you understand the legislation, comply with all requirements, and take full advantage of the benefits of leasehold reform.