10th June 2024

What do Leaseholders and Freeholders need to know? The Leasehold and Freehold Reform Act 2024

The Leasehold and Freehold Reform Act (the Act) received Royal Assent on the 24th of May, bringing significant changes to leasehold in England and Wales. 

Although the Act has been praised for empowering leaseholders and improving transparency in the sector, it has also been criticised for failing to address several key issues. It is also important to note both the Act’s provisions are not yet in effect. Therefore, uncertainty remains for leaseholders considering extending their lease or purchasing their freehold.

 

Key changes

Old law

New law
Length of extension

Lease extensions are capped at 90 years for flats and 50 years for houses.

Leaseholders will be able to secure a 990 year lease extension
Marriage value
(the increase in property value once the lease is extended)

For leases with under 80 years, the leaseholder pays the freeholder 50% of the marriage value

 Marriage value will be excluded when calculating the premium on lease extensions
Two-year ownership condition

Leaseholders have to wait two years before they can extend the lease

 The condition will be abolished
Legal and valuation costs

The leaseholder covers the freeholder’s legal and valuation costs

 Each side will pay their own costs
Calculating the rates
(to buy the freehold or extend the lease)

The rates are determined by valuation surveyors

 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 is 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 does not 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 are 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, call 01892 510 222 or email info@bussmurton.co.uk.

Richard McCulloch

Richard McCulloch
Solicitor