The Freehold and Leasehold Reform Act 2024 becomes law

The-Freehold-Leasehold-Reform-Act-2024.jpg.jpg

Homeowners across England and Wales are expected to receive more rights, powers, and protections over their homes under the Leasehold and Freehold Reform Act 2024 which became law last month.

The Act includes substantial changes for landlords, leaseholders and management companies. Property law expert Eleanor Longworth, based in WHN’s Bury office, outlines the intended objectives of the reforms.

What is a leasehold?

In England and Wales, most people own their homes on either a freehold or leasehold basis.

If someone owns the freehold of their property, they also own the land on which it stands, and they have significant control over their home.

Leasehold, however, means that you have a lease of your home for a certain period. You usually need to pay a rent and possibly other charges to your landlord. There may also be restrictions on what you can do with the property.

The government has been under pressure to change the law for some time, with campaigners arguing that the current system is complicated and open to abuse.

Reforms to the Act were intended to:

  • prohibit the grant or assignment of certain new long residential leases of houses
  • amend the rights of tenants under long residential leases to acquire the freeholds of their houses, to extend the leases of their houses or flats, and to collectively enfranchise or manage the buildings containing their flats
  • give such tenants the right to reduce the rent payable under their leases to a ‘peppercorn’
  • regulate the relationship between residential landlords and tenants
  • regulate residential estate management
  • regulate rent charges
  • amend the Building Safety Act 2022 in connection with the remediation of building defects and the insolvency of persons who have repairing obligations relating to certain kinds of buildings.

How will homeowners benefit from the Freehold and Leasehold Reform Act 2024?

According to the government report announcing that the Act officially received Royal Assent on May 24, 2024, the benefits to homeowners are outlined below:

  • It will be cheaper and easier for people to extend their lease or buy their freehold, so leaseholders pay less to have more security in their home.
  • The standard lease extension term will increase to 990 years for houses and flats (up from 50 years in houses and 90 years in flats), so leaseholders can enjoy secure ownership without the hassle and expense of future lease extensions.
  • Leaseholders will gain greater transparency over service charges. Freeholders or managing agents must issue bills in a standardised format that can be more easily scrutinised and challenged.
  • It will be cheaper and easier for leaseholders to take over the management of their building, enabling them to appoint the managing agent of their choice.
  • It will be cheaper for leaseholders to exercise their enfranchisement rights as they will no longer have to pay their freeholder’s costs when making a claim.
  • It will extend access to redress schemes for leaseholders to challenge poor practice.
  • The government will require freeholders, who manage their building directly, to belong to a redress scheme so leaseholders can challenge them if needed – managing agents are already required to belong to a scheme.
  • The Act will make buying or selling a leasehold property quicker and easier by setting a maximum time and fee that for home buying and selling information.
    Homeowners on private and mixed tenure estates will gain comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.

The government announcement claims the Act will further benefit leaseholders by:

  • Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice that currently acts as a deterrent when leaseholders want to challenge their service charges.
  • Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees.
  • Banning 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.
  • Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can extend their lease or buy their freehold.
  • Properties made up of freehold and leasehold elements will have equal rights ensuring that access to redress schemes for challenging poor landlord/managing agent practices is provided.

What did the Act not do?

As part of the government consultations a cap on ground rents was proposed, however, this faced fierce resistance from pension funds. The Act does not include a cap on ground rents payable under existing leases.

There was also discussion concerning restrictions on a landlord’s ability to forfeit a lease however, this did not make it into the Act. A landlord is still able to forfeit a lease.

Will the Act make a lease extension cheaper?

The Act introduces new valuation methods. Notably it is intended to remove the requirement to pay marriage value and prescribe the rates used for the valuation calculations.

Marriage value is currently payable if a lease has less than 80 years left to run and can significantly increase the premium.

If you have a lease with less than 80 years remaining or have a high ground rent it could make the premium cheaper.

However, as it stands, the valuation rates used in calculating the premiums payable when extending a lease or buying the freehold have not been set. It is, therefore, unclear whether the cost will go up. For those with a lease with more than 80 years left to run or at a low ground rent, the Act could make it more expensive. It remains to be seen. It depends upon what is implemented under the new government.

Should I wait before I extend my lease or buy the freehold?

Although the amendments to the Building Safety Act 2022, will come into force on July 24, 2024, the remainder of the Act will need to be brought into force by statutory instrument by the next government. This is currently anticipated in 2025/2026. It is going to be some time until the Act takes effect.

It your lease has less than 80 years left to run it could be in your interests to wait because the abolition of marriage value could benefit you however, your circumstances, such as a pressing need to sell, may mean that it is in your interests to extend your lease sooner rather than later.

Each homeowner’s circumstances are different. The decision as to when to extend your lease or buy your freehold will differ person to person, household to household.

The Act introduces significant changes for the benefit of leaseholders however, work is still to be done and it is likely to be a number of years until we have clarity on the extent of the changes, in particular to the valuation criteria.

It is important that leaseholders carefully consider their options together with the potential advantages and disadvantages of waiting or extending their lease now.

Eleanor Longworth specialises in residential long leasehold dispute resolution matters, acting on behalf of landlords, management companies and leaseholders. For further advice on acquiring a freehold, extending your lease or any other leasehold dispute resolution matter, call Eleanor Longworth on 0161 761 4611 or by email  [email protected] 

Enjoyed this? Read more from Woodcocks Haworth & Nuttall Solicitors

Latest news

1

Breck to deliver £150m of affordable homes over four years Breck Development In Progress

Breck to deliver £150m of affordable homes over four years

18 Jul 2024

2

Business board launches to support county's economic growth Lancashire Business Board

Business board launches to support county's economic growth

18 Jul 2024

3

Commercial landlords: Five tips to avoid tenancy problems Five tips to avoid tenancy problems SOCIAL.jpeg.jpg

Commercial landlords: Five tips to avoid tenancy problems

19 Jul 2024

4

Notarianni Ice Cream Parlour Scoops Up Energy Efficiency Notarianni.jpeg.jpg

Notarianni Ice Cream Parlour Scoops Up Energy Efficiency

19 Jul 2024

5

Thirteen new contract wins in three months for seoBusiness SeoBusiness Contract Wins

Thirteen new contract wins in three months for seoBusiness

19 Jul 2024

Bec Web Strip 980x120
Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
Lancashire Built Environment Conference
BEC 315 X 315 Px
Networking
25 Sep 2024

Lancashire Built Environment Conference

Conference and Exhibition Centre, Winter Gardens Blackpool, FY1 1HL

08:30 - 13:00

RISE - The Academy for Female Leaders and Managers
WENDY BOWERS RISE Illustrstion copy.jpg.jpg
LBV Hub Seminars
11 Jun 2024 - 04 Dec 2024

RISE - The Academy for Female Leaders and Managers

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:00 - 16:30

Preston Freelancer MeetUp and Coworking Day
Screenshot 2024-06-13 at 13.55.10.png.png
LBV Hub Networking
30 Jul 2024

Preston Freelancer MeetUp and Coworking Day

Society1 Coworking Space, Preston, PR1 3LT

10:00 - 12:00

Skills Bootcamp in Procurement - Cohort 1
Blue-Modern-Land-Travel-Youtube-Thumbnail-2-1024x576.png.png
LBV Hub Seminars
30 Jul 2024 - 08 Oct 2024

Skills Bootcamp in Procurement - Cohort 1

Community & Business Partners CIC, Blackburn, BB2 3UA

09:30 - 13:00

Chamber Breakfast Networking
Chamber Logo1.png.png
LBV Hub Networking
31 Jul 2024

Chamber Breakfast Networking

Pye Motors, Morecambe, LA3 3PF

08:00 - 10:00

Scaling your revenue: From zero to £1m in 60 months
CBP-logo LBV.png.png
LBV Hub Webinar
31 Jul 2024

Scaling your revenue: From zero to £1m in 60 months

Online, Online, Online

08:00 - 09:30

Online Women's Health Clinic
clinic.png.png
LBV Hub Webinar
06 Aug 2024

Online Women's Health Clinic

x, Online, x

12:00 - 12:00

International Coworking Day Open Day
1.png.png
LBV Hub Social
09 Aug 2024 - 09 Aug 2024

International Coworking Day Open Day

Society1 Coworking Space, Prestin, PR1 3 LT

10:00 - 13:00

Knowledge & Networking: Basic Digital Marketing
Chamber Logo1.png.png
LBV Hub Seminars
12 Aug 2024

Knowledge & Networking: Basic Digital Marketing

Lancaster Golf Club, Lancaster, LA2 0AJ

14:00 - 13:00

Understanding Menopause
menopause.png.png
LBV Hub Webinar
15 Aug 2024

Understanding Menopause

x, Online, x

12:30 - 13:15

Sub36 Networking Event - The Bee Centre
Sub36 Socialbee Centre
Networking
15 Aug 2024

Sub36 Networking Event - The Bee Centre

The Bee Centre, Chorley, PR6 8LZ

15:00 - 17:00

Mini Networkers - Family Fun Morning
CBP-logo LBV.png.png
LBV Hub Networking
16 Aug 2024

Mini Networkers - Family Fun Morning

Community & Business Partners CIC, Blackburn, BB2 3UA

10:00 - 13:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV116 Online Graphic
Subscribe now

Weekly news bulletin