Caroline Murray

In May last year, the Leasehold and Freehold Reform Act 2024 was passed in England and Wales. But it’s not fully implemented yet. Here, Caroline Murray, head of Graysons’ conveyancing department gives an update on which parts of the Act have now been implemented and what is likely to come.

Two-year rule abolished

New rules in place from February 2025 mean that, when using the statutory route, leaseholders now have the right to extend the lease on their leasehold flat or buy the freehold on their leasehold house immediately after buying their leasehold property.  They no longer have to wait two years as they did previously.  This doesn’t change the informal or voluntary route, which has always been available from the first day of owning the leasehold.

Right to manage easier and cheaper

Where a building has a mixture of flats and non-residential areas, such as shops and other commercial uses, these have previously been excluded from the Right to Manage if non-residential areas took up more than 25% of the floor space.  From 3 March 2025, this has been increased to 50%, so more property owners will be able to exercise the right and take over the management of a building.

Previously, the freeholder was able to recover their costs for a Right to Manage application from the leaseholder.  Since March this year, landlords are not able to recover these costs relating to a non-contentious Right to Manage application from leaseholders.

What other leasehold changes are planned?

No specific date for any of these changes is given, and they are not likely to be imminent.  The government has said that it expects some of them to take years.  Here are some of the future plans that will improve the rights of leaseholders:

• Making it cheaper for leaseholders to extend their lease or buy their freehold.
• The sale of new leasehold houses will be banned.
• The standard term of a lease extension will be increased to 990 years (from 50 years on houses and 90 years on flats).
• Ground rents will be abolished. As of 30 June 2022, ground rent was effectively banned for anyone buying a new house with a long lease. At present, existing leaseholders as at that date will still pay ground rent on leasehold properties until they buy the freehold or a share of the freehold.
• Buying or selling a leasehold property will be quicker.
• There will be greater transparency on service charges.
• Excessive and unclear buildings insurance commission will be banned.
• Redress schemes will be improved.
• ‘Marriage value’ will be abolished. This is the increase in a property’s value once the lease is extended. Increase in value will no longer have to be shared with the landlord. This proposal is contentious and challenges have already been raised in the courts on behalf of freeholders.

The presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice will be scrapped.

Commonhold

The government has also announced a commonhold white paper and will publish a draft leasehold and commonhold reform bill later in 2025.  This will make commonhold the default tenure of ownership for new build flats.

Commonhold is an alternative to leasehold, whereby the freeholds of flats, houses and non-residential buildings within a development are owned by individuals, with no limit on the time for which they are owned.  Communal areas are jointly owned and managed by the property owners through a commonhold association.

Caroline Murray says:

“People ask if leasehold is being abolished. The answer is no. The Leasehold and Freehold Reform Act will ban the sale of leasehold houses in England and Wales and a ban on leasehold flats is planned too under the Leasehold and Commonhold Bill. Leasehold will still exist for commercial properties.  Leaseholders have been waiting for reform for a long time and, whilst this is a work in progress, we are certainly getting closer.”

It is unlikely that the further changes planned will be made soon.  If you are getting close to only having 80 years left on your lease and don’t want to be caught by the current “marriage value share” arrangements, it would be advisable to take advice now to protect your position.  Failure to act when the lease term falls below 80 years will currently result in any increase in value following lease extension being shared with the freeholder. If you want advice on extending your leasehold, contact our property experts now.

Author: Caroline Murray