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/ 31 May 2024

The Leasehold and Freehold Reform Act 2024 gets Royal Assent

On Friday 24 May 2024 the Leasehold and Freehold Reform Bill was given Royal Assent as part of the “wash up” procedure before Parliament was dissolved ahead of the general election.

Steven Bannell

Partner

Property

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What is the Leasehold & Freehold Reform Bill

The bill was first introduced to Parliament in the Kings Speech in November 2023  and promised to reform leasehold property in three key areas:

  1. Making enfranchisement easier and cheaper
  2. Improving leasehold rights
  3. Banning new leasehold houses so that every new house in England and Wales will be freehold (other than in exceptional circumstances)

The origins of the Leasehold Reform Bill 2024

The initial Bill was introduced amidst a backdrop of calls for radical leasehold reform and followed a 2017 housing white paper and the Conservative Party 2017 manifesto in which they pledged to “crack down on unfair practices in leasehold.”  The Law Society followed these pronouncements by publishing three reports in 2020 which looked at reform of enfranchisement and commonhold, and on 30 June 2022 the Leasehold Reform (Ground Rent) Act 2022   came into law which banned new ground rents. This act was seen as the first of the government’s two stage approach to leasehold reform.

Many campaigners were pleased to see new ground rents banned but said that the ‘22 Act did not go far enough’ and called for ground rents to be abolished entirely.

In November 2023 the Bill was introduced to Parliament and was quickly passed through the early stages. It was briefed that the bill was being progressed to pass into law in Spring 2024 and government sources, including Michael Gove, hinted that the bill may abolish ground rent entirely

Following the snap general election announcement, the Bill was not initially listed as one of the final pieces of legislation to be read as part of the wash up process, but was added on as a last minute addition. During the debate on the afternoon of Friday 24 May 2024 numerous Lords rose to press for amendments to the Bill which were ultimately dropped. The consensus in the Lords was that the legislation was complex and whilst well intended, left a lot to be desired, given it had not received proper debate or scrutiny.

The bill received royal assent that evening.

What has been included in the Leasehold and Freehold Reform Act 2024?

Whilst we await the official publication of the Act, The Leasehold and Freehold Reform Act 2024 will include:

  • The right to extend leases to 990 years (an increase from 50 years for houses and 90 years for flats)
  • Removing the 2 year ownership requirement for formal lease extensions
  • It will be cheaper and easier for leaseholders to take over the management of their buildings
  • Access to Right to Manage for buildings with up to 50% non residential use (it was previously capped at 25% non residential use)
  • In most lease extension matters removing the necessity to pay the freeholder’s legal fees
  • In theory, making it cheaper to extend leases by abolishing marriage value– although see comments below
  • Greater transparency over service charges
  • Extending access to redress schemes for leaseholders to challenge poor practice
  • Making buying and selling leasehold property easier by setting a maximum time that management packs must be supplied by
  • Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice
  • Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees
  • Bans 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. 

What has not been included in the Leasehold and Freehold Reform Act 2024?

Despite the rhetoric and commentary earlier in the year, ground rents have not been abolished. Whilst many leasehold campaigners will be mightily disappointed with this, abolishing ground rents in their entirety would have inevitably led to a judicial review given the potentially damaging impact on numerous investors and pension funds.

The legislation does also not specify how premiums will be reduced. Further details will need to be revealed in Statutory Instruments and it is unknown at this stage if the abolition of marriage value will benefit leaseholders or not.

Other changes to the law (such as issues with the Housing Act 1988 and the Building Safety Act 2022) have not been addressed.

When will the Leasehold and Freehold Reform Act 2024 be implemented?

We do not know when the Leasehold and Reform Act 2024 will be implemented, although Baroness Scott of Bybrook has suggested that the majority of the Act may not be implemented until at least 2025 / 2026.

What should I do if I wish to extend my lease?

Until the new Act is implemented, if you wish to extend your lease, you must do so either informally, or via the statutory method laid out in the Leasehold Reform, Housing and Urban Development Act 1993.

You should seek specialist advice from a valuer before making a decision.

How can our property solicitors help you?

The Leasehold and Freehold Reform Act 2024 may prove to be a welcome change for leaseholders in certain areas, but whilst the Act now has Royal Assent, leaseholders up and down the country will have to continue waiting for actual reform.

If you have any questions on any of the above do not hesitate to contact our property team on +44 (0) 207 228 0017 or via the form below.

Our specialist lease extension lawyers are able to assist with the process from start to finish. Our lawyers are experienced in both voluntary and statutory lease extensions and fully appreciate the potential perils involved in the process.

 

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