On 24 May 2024, the Leasehold and Freehold Reform Act 2024 (“the Act”) was passed in the final parliamentary session before it was dissolved for the general election.
It is anticipated that certain elements of the Act dealing with amendments to the Building and Safety Act 2022 will come into force on 24 July 2024, with the remainder of the Act being brought into force potentially in 2025/2026 following secondary legislation.
The Act itself, when it comes in to effect, will bring significant changes for landlords and tenants.
Key Provisions of the Act:
Lease extensions and collective enfranchisement
- Leaseholders will be able to extend their leases by an additional 990 years with ground rent reduced to a nominal “peppercorn” rent.
- There will be a ban on leasehold houses, with only a limited category of permitted leasehold houses as defined under the Act.
- The Act will make it cheaper for leaseholders to extend their lease or purchase the freehold and leaseholders will not need to pay the freeholder’s costs for making an enfranchisement claim in some circumstances.
- The abolition of marriage value will result in a reduction of the premium payable for leases of less than 80 years left to run.
- The requirement of two-year ownership prior to extending the lease or purchasing the freehold has been removed, which will enable the leaseholders to extend their lease following completion of their purchase.
- Changes in enfranchisement requirements extending the threshold for properties with commercial parts from 25% to 50%, enabling more leaseholders to purchase the freehold or access the right to manage.
Management of Buildings
- The Act will make it more straightforward for leaseholders to challenge poor landlords and managing agents.
- Leaseholder will have easier access to redress schemes in situations of poor management.
Service Charges
- The Act will ban building insurance commissions for freeholders and require transparency in respect of the fees for arranging insurance.
- The Act will simplify the process of challenging unreasonable charges and will remove the presumption that leaseholders are obliged to pay the legal costs of service charge challenges.
- Service charges demanded pursuant to leases will have to be in a standard form, therefore providing more transparency and clarity in relation to the service charge process.
The purpose of the Act is to bring significant changes to leasehold and freehold property, but there are concerns as to the speed the Act was ultimately passed and we await to see the impact of the secondary legislation when the majority of the Act comes into force.
If you require advice in relation to leasehold and freehold matters, please contact Nicola Stewart at nstewart@rooksrider.co.uk or Anthony Shalet at ashalet@rooksrider.co.uk.
