Leasehold and Freehold Reform Bill

The Leasehold and Freehold Reform Bill became law on 24 May 2024.  As of yet, there is no set date when the bulk of the changes will come into effect, but the intention is to improve the rights of leaseholders and home owners generally.

Key changes are:-

Lease extensions

• At the moment, leaseholders who have owned their flat for at least 2 years have a right to extend their lease by an extra 90 years. Under the changes, leaseholders will no longer have to own their flat for 2 years in order to qualify for a lease extension, and the length of the extension will go up to 990 years.
• Under the law as it stands, the leaseholder has to pay the freeholder’s legal and valuation costs as part of the lease extension process. Under the new changes, the leaseholder will no longer have to pay these for most extensions.
• The calculation of the “premium” (effectively the price paid to the landlord for the lease extension) will change so that a particular element, “marriage value” is no longer paid to the landlord. At the moment, leases with less than 80 years left tend to be significantly more expensive due to the inclusion of “marriage value”.  Removal of that element could mean leaseholders of shorter leases can now extend their lease for less.

Collective enfranchisement (aka purchasing the freehold of a block of flats)

• “Marriage value” will also be removed from the calculation of the premium, with the effect that some leaseholders may be able to acquire their freehold for a lower price.
• Whereas currently the right to buy the freehold is not available if more than 25% of the floor area of the building is commercial, that percentage will go up to 50%, so that more buildings will now qualify for collective enfranchisement.
• As with lease extensions, the new changes will remove the obligation on the leaseholders to pay the landlord’s legal and valuation costs in most circumstances.

Service charges

• Service charge demands may soon have to be in a certain standardised format, in order to provide more transparency to leaseholders.
• There are to be more restrictions on landlords passing on certain costs as part of the service charges, including insurance commissions and certain legal / litigation costs.

Sales information

• When a leaseholder comes to sell their flat, there is particular sales information which a buyer will expect to see from a landlord, including information about the service charges, insurance and management, but for the most part there is no legal obligation on landlords to provide the information. This can hold up the sale, and some landlords will also insist on a very high fee for providing the information.  Under the new rules, the government may set down a prescribed timeframe for the landlord to provide the requested information, and impose a maximum fee that they can charge.

Estate rent charges

• At the moment, leaseholders benefit from various rights and protections under the law, but many of those rights do not extend to people who pay an “estate rentcharge”, which is akin to a service charge on freehold property. Under the new law, many of the rights and protections which leaseholders benefit from will be extended to cover estate rentcharges.

Leasehold houses

• The sale of most new leasehold houses is to be banned.
• Owners of leasehold houses will no longer need to have owned their house for 2 years in order to qualify to purchase the freehold.

Our blogs and articles are correct at the time of writing.

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