The Leasehold and Freehold Reform Act became law on Friday 24th May 2024. The new law will give property owners more rights, power, and protection over their homes by:
Banning the creation or transfer of certain new long leases for houses.
Improving tenants’ rights to buy the freehold, extend leases, and manage or collectively own their building.
Allowing tenants to reduce ground rent to a nominal amount.
Regulating relationships between landlords and tenants, estate management, and rent charges.
Updating the Building Safety Act 2022 to address building defect repairs and insolvency issues.
In this article, we’ll provide a full breakdown of the Act and how it may benefit you as a property owner.
Table of Contents
- What is the Leasehold and Freehold Reform Act?
- What is the new law regarding leasehold property?
- What are the main objectives of the Leasehold and Freehold Reform Act?
- What is the new law on lease extension in the UK?
- Who can benefit from the changes without the two-year ownership requirement?
- How does the new law affect non-residential limits for buying freehold or managing buildings?
- How will the new law change the process of buying or selling leasehold properties?
- What measures are implemented to ensure transparency over service charges?
- How does the Act address commissions for building insurance?
- What redress mechanisms are extended to leaseholders under the new laws?
- What rights are granted to freehold homeowners on private estates?
- How does the act protect leaseholders regarding building safety liabilities?
- Will leasehold houses be banned?
- Get expert property advice
What is the Leasehold and Freehold Reform Act?
The Leasehold and Freehold Reform Act is a new law that gives homeowners more rights, power, and protection.
It includes measures to make it easier and cheaper for leaseholders to buy their freehold or extend their lease, among other reforms.
What is the new law regarding leasehold property?
The Leasehold and Freehold Reform Act brings significant improvements for leaseholders in England and Wales. Key changes include:
Lease terms for houses and flats will increase to 990 years, with ground rent reduced to zero.
The removal of ‘marriage value’ and the two-year ownership requirement to extend leases or buy freeholds.
Leaseholders can manage buildings with up to 50% non-residential space.
Service charges must be clear and comparable.
Building insurance commissions will be replaced with transparent fees.
Leaseholders can challenge poor practices without paying freeholders’ legal costs.
A ban on new leasehold houses.
Freeholders and developers are accountable for building remediation.
What are the main objectives of the Leasehold and Freehold Reform Act?
The new law aims to improve homeownership for leaseholders in England and Wales by empowering them and enhancing their consumer rights.
What is the new law on lease extension in the UK?
Under the new law, the standard lease extension term for houses and flats has been increased to 990 years where previously it was only 90 years for flats and 50 years for houses.
Plus, when you extend your lease, you won’t have to worry about ground rent anymore as they’ve reduced it to zero.
Another big win is the removal of marriage value,’ which used to make lease extensions more expensive, especially as a lease got closer to expiring. Now, without this factor, extending your lease is more affordable.
Further, you no longer have to wait two years to take advantage of these changes!
Who can benefit from the changes without the two-year ownership requirement?
Before now, you had to own your leasehold property for at least two years before you could buy the freehold or extend the lease.
Now, anyone who owns a leasehold property can exercise their right to freehold ownership or a super long lease extension – no waiting around for two years required.
So, anyone who owns a leasehold property, whether they've had it for a week or a decade, can benefit from these changes right away.
How does the new law affect non-residential limits for buying freehold or managing buildings?
Previously, if more than 25% of a building was non-residential (for example, offices or shops are mixed in with residential units), you couldn’t buy the freehold or take over managing the building.
Under the new law, however, they’ve bumped that limit to 50%. That means if up to half of the building is non-residential space, leaseholders can now buy the freehold or take over managing the whole shebang.
How will the new law change the process of buying or selling leasehold properties?
When buying or selling a leasehold property, there's usually lots of paperwork involved. Things like building insurance records or financial statements need to be provided to the buyer by the freeholder or landlord.
The new laws set maximum time and fee limits for providing all this necessary information. This means that sellers won't have to wait forever to get the paperwork they need, and they won't be hit with sky-high fees for it either.
What measures are implemented to ensure transparency over service charges?
The Act requires standardised, comparable formats for service charge transparency, empowering leaseholders to challenge unreasonable charges.
This means leaseholders will have access to clear, standardised formats for understanding exactly what they're being charged for and why. This transparency empowers leaseholders to scrutinise their service charges and challenge any that seem unreasonable or unfair.
How does the Act address commissions for building insurance?
When it comes to building insurance for leasehold properties, there used to be commissions involved. These commissions were essentially extra fees that managing agents, landlords, or freeholders could tack on top of the insurance premiums.
But now, those commissions are out the window. Instead, there are transparent administration fees. This means that any fees associated with arranging building insurance will be disclosed to leaseholders upfront, without any hidden extras.
By getting rid of these commissions and replacing them with transparent fees, leaseholders can have more confidence that they're not being hit with excessive charges on top of their insurance premiums.
What redress mechanisms are extended to leaseholders under the new laws?
Redress mechanisms are ways for leaseholders to address issues or grievances with freeholders or property managers. These could range from unfair charges to poor management practices.
Under the new law, leaseholders now have broader access to redress schemes. These schemes provide a formal process for leaseholders to challenge poor practices or unfair treatment by their freeholders or managing agents. It gives them a platform to voice their concerns and seek resolution.
Previously, if a leaseholder challenged poor practice and took legal action, there was a presumption that they would have to cover the freeholder's legal costs if they lost.
But under this new law, that presumption is scrapped. This means leaseholders are no longer automatically on the hook for the freeholder's legal expenses if their challenge doesn't succeed.
What rights are granted to freehold homeowners on private estates?
Under the new law, freehold homeowners who live in private estates have the right to know exactly what they’re being charged for estate charges.
They also have the right to challenge any charges they think are unfair or unreasonable, including taking their case to a Tribunal.
How does the act protect leaseholders regarding building safety liabilities?
The Act extends measures introduced in the Building Safety Act 2022 to make sure that freeholders and developers can’t avoid their responsibilities when it comes to fixing any safety issues in buildings.
It ensures that freeholders and developers can’t wiggle out of their obligations to do necessary remediation work on buildings to make them safe. This includes things like fixing fire safety issues or other hazards.
Will leasehold houses be banned?
Under the new law, in most cases, new leasehold houses are banned in England and Wales. That means, if you’re buying a house, you won’t have to worry about dealing with leasehold ownership. You’ll own the freehold outright, which gives you more control over your property.
Get expert property advice
The Leasehold and Freehold Reform Act brings significant changes for property owners, giving them more rights, power, and protection over their homes.
Wondering how these new laws affect you as a property owner? Lawhive is here to help.
How can Lawhive help?
Our network of experienced property lawyers is on hand to provide fast, affordable expert guidance on how the Leasehold and Freehold reforms impact you and your property.
If you have questions about lease extensions, buying the freehold, or managing your building, our network of solicitors can offer personalised advice tailored to your situation.
Further, if you encounter issues with your freeholder or managing agent, they can provide legal representation to protect your rights and interests.
Why choose Lawhive?
Our network of expert solicitors specialise in property law and is up to date with all the latest legal developments, ensuring you receive accurate and reliable advice.
We understand that every situation is unique, so we offer personalised free case evaluations to address your specific needs and concerns.
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For more information, contact us today for your free case evaluation and get a free, no-obligation fixed-fee quote for the services of a specialist solicitor.