The Leasehold and Freehold Reform Act received Royal Assent on the 24th of May, bringing significant changes to leasehold reform in England and Wales.
Although the Act has been praised for empowering leaseholders and improving transparency in the sector, it’s also been criticised for failing to address several key issues. It is also important to note that the Act’s provisions aren’t yet in effect. Therefore, uncertainty remains for leaseholders considering extending their lease or purchasing their freehold.
Key Changes
Length of extension:
Old Law: Lease extensions are capped at 90 years for flats and 50 years for houses.
New Law: Leaseholders will be able to secure a 990-year lease extension
Marriage value (the increase in property value once the lease is extended):
Old Law: For leases with under 80 years, the leaseholder pays the freeholder 50% of the marriage value
New Law: Marriage value will be excluded when calculating the premium on lease extensions
Two-year ownership condition:
Old Law: Leaseholders have to wait two years before they can extend the lease
New Law: The condition will be abolished
Legal and valuation costs:
Old Law: The leaseholder covers the freeholder’s legal and valuation costs
New Law: Each side will pay their own costs
Calculating the rates (to buy the freehold or extend the lease):
Old Law: The rates are determined by valuation surveyors
New Law: The calculation rates will be set, and an online calculator will be available
What reforms were not included?
The Act has drawn criticism for failing to address certain key issues:
Ground Rent on Existing Leases: Despite consultations, there’s no cap on ground rents for existing leases in the current legislation.
Regulation of managing agents: The Act does not include measures to regulate managing agents, despite calls for greater oversight and accountability in this area.
Abolition of Leasehold: Leasehold will not be abolished entirely.
Prevention of Forfeiture: The Act doesn’t address the issue of lease forfeiture.
When will The Leasehold and Freehold Reform Act 2024 come into effect?
While some minor provisions will take effect in July 2024, the full implementation of the Act depends on the next government’s priorities, and any Secondary Legislation required. Therefore, leaseholders are unlikely to see the full effects until 2025/26. Moreover, the freehold sector might challenge some aspects of the Act, leading to further delays and uncertainty.
Whether you’re a leaseholder or a freeholder, our team is well-equipped to guide you through the implications of this landmark legislation. For more information on how the Leasehold and Freehold Reform Act may impact your situation, please get in touch on 01892 510 222.
