What is the Leasehold Reform 2024?
The Leasehold and Freehold Reform Bill has received Royal Assent and has become law.
We want to help you understand what impact this may have on your situation, and how we can help.
During the King’s Speech in 2023, The Leasehold and Freehold Reform Bill was introduced and sent to the House of Commons.
A bill to prohibit the grant or assignment of certain new long residential leases of houses, to amend the rights of tenants under long residential leases to acquire the freeholds of their houses, to extend the leases of their houses or flats, and to collectively enfranchise or manage the buildings containing their flats, to give such tenants the right to reduce the rent payable under their leases to a peppercorn, to regulate the relationship between residential landlords and tenants, to regulate residential estate management, to regulate rent charges and to amend the Building Safety Act 2022 in connection with the remediation of building defects and the insolvency of persons who have repairing obligations relating to certain kinds of buildings.
What does it mean?
The main aim of the leasehold reform 2024 was to –
- Make it cheaper and easier to extend leases for flat owners, or to buy the freehold for existing leaseholders in houses.
- Increase the standard Lease Extension term from an additional 90 years to 990 years for flats, with ground rent reduced to £0 on Statutory Lease Extensions.
- Remove the requirement for new leaseholders to have owned their house or flat for two years before they can benefit from the legislation.
- Make buying or selling a leasehold property quicker and easier by setting a maximum time and fee for the provision of information to a leaseholder by the freeholder.
- Requirements for greater transparency over leaseholders’ service charges.
- Build on The Building Safety Act 2022, ensuring freeholders and developers can’t escape their liabilities to fund building remediation work.
What was made law?
Following the election announcement, the Bill was rushed through. This will now undoubtedly be scrutinised, leading to legal challenges and amendments. However, the current changes are listed below.
- Extending your lease or buying the freehold is now cheaper. The Act abolishes “marriage value,” which is an additional level of compensation due to the freeholder when you extend your lease if your lease has dipped below the 80-year remaining mark.
- Standard Lease Extensions for houses and flats are now 990 years, providing greater security when serving a Statutory Notice
- The Act bans the sale of new leasehold houses (with some exceptions). Most new houses will be freehold.
- Leaseholders will gain more control over service charges, and opaque commissions for building insurance will be banned.
- You can now apply to extend your lease or buy the freehold as soon as you acquire the property, instead of waiting for 2 years.
So what happens now with the leasehold reform 2024?
There is no date for implementing the new bill, despite it now being law.
We think the Act will require much more scrutiny and amendment to layer the details. There will also be serious challenges from freeholders, who may feel they have been mistreated and at financial disadvantage having seen a reduction in the value of their assets.
It is still our opinion that if your lease is considered short (under 85 years), it is in your best interest to act as soon as possible to secure a Lease Extension on the cheapest terms.
There is no mention in the Bill that the payment of a premium to the freeholders will be removed completely.
What services do we offer at ONP Solicitors?
We specialise in this niche area of law, leveraging our expertise to secure a lease extension on terms most favourable to you. We handle every step of the process to ensure your extended lease is completed and registered with HM Land Registry. Additionally, we collaborate with a team of expert surveyors who can provide support when needed.
The best way to get in touch is to book a free consultation with one of our Lease Extension specialists. The freeholder is not likely to approach you to do this. They can charge more as the lease reduces in length, so it’s best to be proactive.
We spoke to Jonathan Frankel, Partner at Cavendish Legal Group, to get his thoughts.
Are you happy with the outcome of the Leasehold Reform 2024?
Happy no, unsurprised yes. The most positive aspect of the legislation is that the leasehold owner can exercise a statutory lease extension claim from day one. Currently, you have to wait two years from registration. A clear win for leaseholders, and lawyers, dispelling the need for assignments and making it cheaper for buyers. This is a step in the right direction, however, there are many shortcomings to the new act.
Why was the ground rent cap not included?
Parliament rushed it through and watered it down. While consultations for leasehold reform started back in 2017, the process has been slow. One of Gove’s clear objectives was that ground rents should be a thing of the past. To reduce them to “a peppercorn”. But it took only 11 minutes to pass all 67 amendments.
It’s clear it was pushed through so the Government could tick off its stated objective of making this legislation law. Consequently, the Act is underdeveloped and therefore underdelivers. We’ve seen these rushed Bills lead to impacts on human rights issues before, as with the Building Safety Act 2022.
Aside from the ground rent cap, is everything else as expected?
There is no great detail on implementation. There may not be an indication of any in-force date for at least one year or more, which matter is reserved to the Secretary of State. This will cause a lot of confusion for our clients. They may have questions about how this impacts them concerning their lease extension transaction that they are currently undergoing or anticipate starting.
Questions currently being asked include: What happens if they have already served a notice, should they hold fire on starting the process, should they withdraw? This comes down to the legislation being rushed.
Even more than ever, it will be important for us to support clients and colleagues with well-informed advice. Our specialist lease extension department is a valuable resource, especially as this new law develops.
