The Leasehold and Freehold Reform Act 2024: Your guide to the reforms

The Leasehold and Freehold Reform Act, which became law on 24 May 2024, is a long-awaited piece of legislation designed to make it easier and cheaper for leaseholders to extend their lease or purchase the freehold of their building. Despite the Act already being law, no commencement date has yet been given.

So, what can leaseholders expect once the reforms come into force?

What’s already been done

In 2022,  legislation put an end to ground rent for most new long residential leasehold properties in England and Wales

It also means that when extending a lease, the additional years added onto the lease (usually 90 years for leasehold flats) must be at zero ground rent. However, any ground rent in the current lease can continue for the remainder of the term. So, if you have a remaining lease term of 82 years and you extend your lease, the ground rent will continue for those 82 years before dropping to zero for the extended term.

The reforms

When the secondary legislation is introduced in 2025/26, the Leasehold and Freehold Reform Act will:

• Give leaseholders the right to extend their lease by up to 990 years

When the changes come into effect, you will have the right to extend your lease by 990 years as standard (currently 90 years), with the ground rent reduced to a ‘peppercorn’ (i.e., nothing).

• Make it cheaper for some leaseholders to extend their lease

Firstly, leaseholders with a short lease (fewer than 80 years remaining) will no longer have to pay the marriage value when extending a lease.

Secondly, the removal of the requirement for leaseholders to pay their freeholder’s legal costs when extending a lease or buying the freehold.

Given that the Act does not specify the rates that will be used to calculate the price of lease extensions or freehold purchases, we cannot be certain at this point that the process will definitely be cheaper for leaseholders.

• Give leaseholders greater transparency over service charges

The Act will require freeholders and management companies to issue bills in a standardised format that is easier to scrutinise and challenge. They will also be required to provide a detailed annual report listing plans for any major works.

• Make it cheaper for leaseholders to exercise their enfranchisement rights

The Act will remove the presumption that leaseholders must pay their freeholders’ legal costs when challenging poor practice.

• Make it easier and cheaper for leaseholders to take over the management of their building

Leaseholders in mixed use buildings will be able to access the Right to Manage where up to 50% of the building’s floor space is commercial (rather than the current 25%) and appoint the managing agent of their choice.

• Make it quicker and easier to buy and sell leasehold property

Under the current system, freeholders or management companies who are asked to answer conveyancing solicitors’ enquiries are not obliged to respond or held to a time limit.  

The Act will set a maximum time and fee for home buying and selling information.

• Remove the requirement for leaseholders to have owned their property for two years before exercising their enfranchisement rights

Leaseholders will be able to extend the lease or purchase the collective freehold from day one.

• Ban the sale of new leasehold houses aside from in exceptional circumstances

• Extend access to redress schemes for leaseholders challenging poor practice

Whilst management agents are already required by law to belong to a redress scheme, the Act will also require freeholders who manage their building directly to belong to one too.

• Grant comprehensive rights of redress to homeowners on private or mixed tenure estates

These homeowners will have the right to access information on the charges they pay, as well as the ability to challenge these if they believe they are unreasonable.

What next?

Given that we don’t yet know the commencement date for the reforms, all we can do is keep a sharp eye out for further updates from the government so that we can let you know as soon as possible.

Many of our clients have been asking whether they should wait for the secondary legislation to be enacted before moving to extend their lease. This entirely depends on your circumstances and there is no way to know for certain – however, you can click here for our blog exploring your options.

In the meantime, we’d be delighted to talk with you about any lease enfranchisement matters you are currently dealing with. Please do call us on 0203 871 0039 or email leasehold@attwaters.co.uk