Commercial Property
What is the Leasehold and Freehold Reform Act 2024 and what does it mean for leaseholders?
26th November 2024
What is the Leasehold and Freehold Reform Act 2024?
The Leasehold and Freehold Reform Act 2024 (‘the Act’) is a new piece of legislation that is intended to help leaseholders by making it easier and less expensive to buy your freehold, extend your lease and to assist with service charge regimes.
What does the Act do?
It makes various changes to leasehold and freehold legislation including:
- Making it cheaper to extend your lease or buy your freehold by ceasing the requirement that a leaseholder has to pay their landlord’s legal costs
- Banning the sale of new leasehold houses (other than in restricted circumstances)
- Stopping excessive buildings insurance commissions
- Ending the 2 year ownership requirement before extending a lease or purchasing a freehold related to the lease
- Granting additional rights to freehold homeowners similar to those which leaseholders currently have with regards to estate charges and the transparency of how they have been calculated
- Enabling more leaseholders to purchase their freeholds or exercise their right to manage where they live in a mixed-use building – currently you are barred from purchasing the freehold under the LRHUDA 1993 if more than 25% of the floor space is commercial property in your building. This restriction is being increased to 50%.
- Increasing lease extension terms under the LRHUDA 1993 or LRA 1967 from a 90 or 50 year extension to a 990 year extension
- Landlords who manage their own buildings will be required to belong to a redress scheme so that they can be more easily challenged in relation to poor practice
- Removing the presumption that the leaseholder will pay the landlord’s legal costs if they challenge service charges
- Introducing a legal right to buy out a ground rent (previously the only way to insist on this was by exercising your right to a lease extension)
Is the Act currently in force?
No. It became law in May 2024 but the main provisions of the Act require more legislation to bring them in to force. It may take the new Labour government some time to bring them in and for the time the pre-reform law applies.
What other reforms are anticipated?
The government has suggested further legislation will be introduced to continue these reforms in 2024/25. They are committed to ending leasehold and reviving commonhold.
They have indicated that they would like to:
- Progress the Law Commission’s other recommendations in relation to leasehold
- Take further action in relation to unfair ground rents
- Restrict the draconian right of forfeiture
- Require all new flats to be sold as commonhold flats
- Further address the issues with private housing estates and the management charges that owners are being forced to pay
These further suggestions are eagerly anticipated by homeowners and enfranchisement practitioners.
Jo Ironside – Partner in the Enfranchisement Team