Embracing Substantial Transformations Ahead – The Leasehold and Freehold Reform Act 2024
The UK Government’s sudden decision to signal a snap Election slated for 4 July 2024, created a sense of urgency within Parliament to address pending Bills before its dissolution on 24 May 2024.
Among the Bills under scrutiny was the Leasehold and Freehold Reform Bill, aimed at safeguarding homeownership rights for leaseholders. After extensive debates in the House of Lords, the Bill received Royal Assent on 24 May 2024,
officially becoming the Leasehold and Freehold Reform Act.
This Act is poised to profoundly affect leaseholders owning residential properties across England and Wales.
Key Changes
The changes under the Act include:
- The standard lease extension period will increase to 990 years for both houses and flats, up from the previous 50 years for houses and 90 years for flats. This change will eliminate the hassle and cost for leaseholders associated with future lease renewals.
- The legislation provides a simplified and cost-effective procedure for leaseholders to either extend their residential lease or purchase the freehold (if they qualify and can exercise their enfranchisement rights). This will enable leaseholders to incur lower costs while gaining greater security for their homes.
- Tenants will find it easier to challenge unreasonable charges, as the assumption that leaseholders must cover the legal costs of these challenges through their service charges will be eliminated.
- The process of leaseholders assuming control of building management is streamlined, empowering the leaseholders with the freedom to appoint their preferred managing agent to oversee the property.
- The legislation will allow leaseholders to extend their residential leases or purchase the freehold without needing to have owned their property for two years, as previously required under the Leasehold Reform Act 1967.
- Service charges will be presented in a standardised format, making them easier to understand and dispute if necessary. This will enable leaseholders to gain more control over service charges, as freeholders or managing agents must follow a transparent billing process, allowing for easy review and challenge.
- Sale of new leasehold houses will be banned (other than exceptional reasons) and every new house in England and Wales will be sold as a freehold.
The exact commencement date for these reforms remains uncertain. The Act awaits secondary legislation, and this stands as a significant task to be handled by the incoming government set to assume office after the general elections on July 4, 2024.
