Leasehold reform 2024 - what you need to know

27 Jun The Leasehold and Freehold Reform Act 2024: What you need to know

Posted at 00:00h in Litigation by

Are you a leaseholder or a freeholder impacted by the newly passed reform? Saqib Khan, Associate solicitor at HRJ Foreman Laws Solicitors discusses the important and material changes coming into effect.

The much-anticipated Leasehold and Freehold Reform Act 2024 (the “Act”) officially received Royal Assent on the 24th May 2024 as the final Bill passed before Parliament was dissolved ahead of the upcoming general election.  (Also read about the updates following the Kings Speech on 17th July 2024 which provided for the new Labour government’s agenda in relation to the implementation of the Act.)

The new legislation seeks to introduce significant changes for owners of leasehold and freehold properties in England and Wales.

When will the changes take effect?

Whilst the Act has become law, the changes it will bring will not take effect until the Act is implemented, by whichever party is elected on the 4th July 2024 following the general election. However, there are some changes coming to the Building Safety Act 2022 and these will come into force on the 24th July 2024.

What are the material changes?

Changes for Leaseholders and Enfranchisement Claims

Some of the key changes include:

  • The Act introduces the ban of new leasehold houses in England and Wales (save for exceptional circumstances) resulting in every sale to be sold on a freehold basis.
  • The standard lease extension terms will increase to 990 years from 90 years for both houses and flats.
  • The Act abolishes the long-standing requirement for a leaseholder to have owned the property for at least 2 years. As a result, leaseholders can apply to extend their lease upon completion of purchase.
  • The Act also abolishes “marriage value,” which is an additional layer of compensation due to a freeholder in circumstances where a leaseholder seeks to extend a lease which has less than a term of 80 years remaining on the lease.
  • The Act provides for tenants to be able to acquire the freehold to their property more easily and in a more cost-effective manner as they will not be required to pay their freeholder’s reasonable costs in an enfranchisement claim.
  • Leaseholders looking to acquire the freehold or Right to Manage by way of a collective enfranchisement claim will be pleased to know that the existing threshold of 25% (commercial floor space) has been increased to 50% effectively increasing the number of leaseholders entitled to purchase the freehold of their property or access Right to Manage.

Changes to Insurance and Service Charge

The Act introduces several changes in relation to the demand for Service charges to include:

  • That any demand for Service Charge will need to be made in a standard prescribed form to include the statement of account and invoice. The change seeks to achieve greater transparency for leaseholders. This will also provide scope for leaseholders to challenge any unreasonable charges claimed by the Freeholder.
  • In addition, There will also  be a requirement for freeholders or their managing agents to provide regular information (including insurance details), further providing transparency to leaseholders.
  • The Act will introduce a ban on any commissions made in arranging for insurance by freeholders or their managing agents.
  • The Act will seek to simplify the process in which leaseholders may challenge unreasonable charges claimed by the freeholder or their managing agents. In addition, the presumption that leaseholders will be liable to pay the legal costs in doing so will be abolished.

Changes to Management of Buildings

  • The Act will implement a change for freeholders who manage any buildings directly to become a member of a redress scheme, similarly as to how managing agents are required to be. This will aim to ensure that leaseholders are able to challenge any unreasonable charges more effectively.
  • Rights of redress will also extend to properties consisting of mixed tenures (freehold and leasehold) to ensure that leaseholders are properly informed of the charges they are required to pay and are given the ability to challenge them as well as to challenge poor practices.
  • Finally, the Act will seek to set a maximum fee and time limit for the provision of home buying and selling information.

Ground Rent

Whilst there was much anticipation of the proposals to cap or remove ground rents, the proposals were not approved in time ahead of the dissolution of Parliament and as a result there are currently no changes to the provisions of Ground Rent.

Contact us for legal advice.

  • Email info@hrjforemanlaws.co.uk
  • Call Hitchin 01462 458711, Welwyn Garden City, 01707 887700, Old Harlow 01279 709100
  • Complete our contact form here

Keep up to date with our legal news and follow us: