The Leasehold and Freehold Reform Act completed its journey through Parliament and received Royal Assent on May 24, 2024, officially becoming law.
Many of the key changes will not take effect immediately, as secondary legislation is required to implement provisions such as abolishing marriage value and setting new formulas for extension and enfranchisement premiums. The government’s impact assessment suggests this additional legislation likely won’t be in place until 2025 or 2026. Until then, the current laws on leasehold remain in effect.
However, once implemented, the Act will strengthen existing consumer rights and introduce new ones for leaseholders by:
Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years for houses and 90 years for flats).
Removing the 2-year ownership requirement before being eligible to extend or purchase the freehold.
Providing greater transparency over leaseholders’ service charges by requiring freeholders or managing agents to issue bills in a standardised format that can be more easily reviewed and challenged.
Making it cheaper for leaseholders to exercise their enfranchisement rights, as they will no longer have to pay their freeholder’s costs in most cases when making a claim.
Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.
Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
Providing leaseholders with the ability to access the Right to Manage in buildings where up to 50% of the floor space is commercial (up from 25% limit).
The Leasehold and Freehold Reform Act introduces the most significant changes to the leasehold system in years. While the full impact won’t be realised until additional legislation is passed, the Act not only establishes a new direction for balancing Freeholder and Leaseholder rights, but it also bring up a fairer and more transparent property market.
At Chestertons, we are committed to keeping our clients informed and prepared for these upcoming changes, ensuring they navigate the evolving property landscape with confidence.