Freehold and Leasehold Reform Act 2024: An overview

The Freehold and Leasehold Reform Act 2024 marks a significant step in improving the rights of residential long leaseholders of houses and flats in England and Wales.

Leaseholds have long been a contentious issue, with many leaseholders facing high ground rents, hefty service charges, and restrictive conditions. The Act aims to address these issues, promoting fairness and transparency in property transactions.

Key provisions of the Act

1. Ban the granting of long residential leases of houses: Unless they are within a permitted exception, the Act will prevent the granting or entering into an agreement to grant a long residential lease of a house. If the ban on granting a long residential lease of a house is breached, the principle right of redress is the right to acquire the freehold

2. 990-year lease extensions: Qualifying tenants will be entitled to a new lease for a term of 990 years (increased from 50 years for houses and 90 years for flats). This creates long term security and avoids the need for repeated lease extensions

3. Immediate lease extensions: The requirement to have owned the lease for two years before making a claim will no longer apply. This change will relieve the pressure on those buying short leases during the conveyancing process and allow people to take action as soon as they acquire their lease.

4. Shared ownership leases: Shared ownership leaseholders will obtain lease extension rights

5. New valuation methods: The calculation for enfranchisement and leasehold extensions has been made more transparent and affordable, with an emphasis on reducing the often prohibitive costs associated with enfranchisement

6. Costs: A new costs regime will be introduced in which each party generally bears its own costs (except in low-value claims).

7. Right to manage: A greater number of mixed-use properties are likely to be eligible for the right to manage, due to an increase on the floor area limit.

8. Service charges: Service charges will become more regulated, and tenants will have a new right to require information in relation to service charges. 

Leasehold reforms in the King's Speech

The recent King's Speech outlined further ambitious reforms in the leasehold sector, building on the momentum of the Freehold and Leasehold Reform Act 2024. These proposed changes include:

1. Ending leasehold: The Labour manifesto pledged that the party would bring an end to leasehold property and to enact the remaining Law Commission recommendations related to leasehold enfranchisement and the Right to Manage

2. A draft Leasehold and Commonhold Reform Bill: Further empowering leaseholders to extend their lease, enfranchise, and manage their own buildings, while also limiting the sale of new leasehold flats, regulating existing ground rents, and ending forfeiture of residential leaseholders

3. A Renter’s Rights Bill: To abolish ‘no-fault’ evictions and strengthen tenant’s rights and protections. 

A significant shift in the UK property market

The Freehold and Leasehold Reform Act 2024 represents a significant shift in the UK property market. The Act includes a number of improvements from a residential long leaseholders’ perspective, but many would argue that it fell short of its initial key aims.

The draft legislation in the King’s speech aims to fill the gaps left behind by the Freehold and Leasehold Reform Act 2024 and the government has indicated that “commonhold should be the default tenure for all new properties” but it remains to be seen how that will be implemented.

These are complex reforms that will require lengthy secondary legislation, so there is still uncertainty as to when the provisions of the Act will come into effect. 

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