Leasehold and Freehold Reform Act 2024

The Leasehold and Freehold Reform Act 2024 (the New Act) received royal assent on 24 May 2024.

The intention of the New Act is to create fairer terms for leaseholders and reduce the cost of extending their leases.

While the exact implementation date of the New Act remains unclear, details are expected in the upcoming King’s Speech in July, with a phased rollout anticipated.

The New Act follows the Leasehold Reform (Ground Rent) Act 2022, which took effect on 30 June 2022 which reduced ground rent in new leases to nil.

Unfortunately, the New Act does not cap or eliminate ground rent in existing leases, but future proposals are expected to address this.

Important Changes in the New Act

Lease Extensions and Terms

The standard increase of the term for lease extensions will be an extension by 990 years, for both flats and houses. This replaces the current standard of 90 years for flats and 50 years for houses.

Cost Implications

The New Act removes the presumption that leaseholders are responsible to cover the freeholder’s legal and professional costs when extending leases or purchasing the freehold.

Marriage value, a significant cost for leaseholders when their leases are below 80 years, will be abolished. This will benefit those with short leases.

If your lease is at 80 years or below, you may wish to consider waiting for the New Act to come into force before you extend your lease, as it will waive marriage value and payment of the freeholder’s costs.

Ban on Leasehold Houses

New homes must be sold as freehold (save for in limited circumstances e.g. if it is a community housing leases or a retirement housing lease), addressing recent trends of developers selling new houses leasehold, with escalating ground rents.

Enfranchisement

The threshold for commercial space in buildings seeking collective enfranchisement will increase from 25% to 50%, making it easier for leaseholders to acquire freehold.

Standardised Procedures

Freeholders must provide standardised service charge bills and annual reports, enhancing transparency.

Registration with a redress scheme is mandatory for freeholders managing buildings, aiding leaseholders in challenging unfair practices.

Lease Extensions and Sales

The two-year ownership requirement before applying for a lease extension is removed, facilitating sales of properties with short leases.

A time and cost limit for information provision during the sale of leasehold properties from the freeholder endeavours to streamline transactions.

Key Considerations for Freeholders

  • Be prepared to cover your legal and professional fees post-enactment.
  • Expect reduced premiums for lease extensions due to the abolition of marriage value.
  • Ensure compliance with the redress scheme requirements.
  • Anticipate increased demand for lease extensions and enfranchisement.

These reforms aim to balance interests and create fairer conditions for leaseholders, ultimately making lease extensions and property ownership more accessible and transparent.

How we can help

Our expert conveyancing team is well versed in all types of property law and we understand what makes each transaction unique. So, if you need support with extending a lease, purchasing a freehold, or an enfranchisement matter, then get in touch with our team today.

For further information, please contact Sarah Khamis-Carson in the residential conveyancing team on 01202 421111 or email S.KhamisCarson@hklaw.uk. HK Law has offices in BlandfordBournemouthCrewkerneDorchesterParkstonePooleSwanage, and Wareham.

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