Leasehold Reform: Law Changes And What's Next

The Leasehold and Freehold Reform Act became law in May 2024 but has not yet been implemented. The Act will make it easier and cheaper for leaseholders to buy their freehold, increase the standard lease extension term to 990 years, and provide greater transparency over service charges. It will also ban the sale of new leasehold houses and remove the requirement for new leaseholders to own their property for two years before extending their lease or buying their freehold. While the Act has received Royal Assent, it is still awaiting full implementation, which is expected to take years rather than months.

Leaseholders will have greater transparency over service charges

The Leasehold and Freehold Reform Act became law on 24 May 2024, with Royal Assent granted on the same day. The Act will make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges.

Leaseholders will now have greater transparency over their service charges, with freeholders or managing agents required to issue bills in a standardised format. This will make it easier for leaseholders to scrutinise and challenge these charges. The new legislation will also remove barriers for leaseholders to challenge their landlords' unreasonable charges at a tribunal.

The reform will also benefit leaseholders by banning opaque and excessive buildings insurance commissions for freeholders and managing agents. These commissions will be replaced with transparent and fair handling fees. This is a significant change, as insurance premiums and commissions have long been a contentious issue for leaseholders, who were previously at the mercy of building owners and brokers who lacked integrity.

The Financial Conduct Authority's (FCA) regulation update, which came into effect on 31 December 2023, is also worth noting. This update ensures that insurers treat leaseholders as stakeholders and consider them in their processes and policy design. The FCA's rules also require firms to provide detailed information about their products and services once a policy is purchased, ensuring that leaseholders have access to clear and transparent information.

Overall, the Leasehold and Freehold Reform Act is a positive step towards providing leaseholders with greater transparency and fairness over service charges, empowering them to make informed decisions and challenge any unreasonable charges.

Leaseholders will be able to challenge unreasonable charges

The Act will also remove barriers for leaseholders to challenge their landlords' unreasonable charges at a tribunal. Leaseholders will have greater transparency over service charges and who manages the building. Freeholders or managing agents must issue bills in a standardised format to make them easier to scrutinise and challenge.

The Act will also scrap the presumption that leaseholders pay their freeholders' legal costs when challenging poor practice. This will make it cheaper for leaseholders to exercise their enfranchisement rights, as they will no longer have to pay their freeholder's costs when making a claim.

Leaseholders will also benefit from the extension of access to redress schemes, allowing them to challenge poor practice. The Act will enforce freeholders who manage their buildings directly to belong to a redress scheme, bringing them in line with managing agents who are already required to belong to a scheme.

The Act will also grant comprehensive rights of redress to homeowners on private and mixed tenure estates. This means they will receive more information about the charges they pay and have the ability to challenge how reasonable they are.

While the Act provides new protections for homeowners, it is important to note that it does not include a cap on ground rent for existing leaseholders. This was a commitment made by the Conservatives in their 2019 election manifesto, but it was not added to the Bill before the election was called. The Labour government has stated its intention to "tackle" existing ground rents, but has not provided specifics on how it plans to do so.

Leaseholders will be able to buy their freehold more easily and cheaply

The Leasehold and Freehold Reform Act became law in the UK on 24 May 2024, with the aim of empowering leaseholders and giving them greater rights and protections.

One of the key features of the Act is to make it easier and cheaper for leaseholders to buy their freehold. This means leaseholders will be able to pay less to have more security in their homes. The standard lease extension term has been increased to 990 years for houses and flats, up from 50 years for houses and 90 years for flats. This means leaseholders can enjoy secure ownership without the hassle and expense of future lease extensions.

The new law also provides leaseholders with greater transparency over service charges. Freeholders or managing agents must now issue bills in a standardised format, making them easier to scrutinise and challenge. In addition, it will be easier and cheaper for leaseholders to take over the management of their buildings, allowing them to appoint the managing agent of their choice.

The Act also removes the requirement for a new leaseholder to own their property for two years before they can extend their lease or buy their freehold. This gives new homeowners more flexibility and control over their properties. Overall, the Leasehold and Freehold Reform Act is a positive step towards giving leaseholders more rights and protections, making it a more transparent and fair process for homeowners.

Leaseholders will be able to extend their lease more easily and cheaply

The new legislation removes the requirement for a new leaseholder to own their property for two years before they can extend their lease. This change, along with the removal of prohibitive costs like 'marriage value', will make it more accessible and affordable for leaseholders to extend their leases.

An online calculator will be introduced to simplify the process of determining the cost of extending a lease. The calculation rates will be set by the government at a market value, eliminating the need for extensive arguments in the First-tier Tribunal. Leaseholders will also benefit from discounts for any improvements they have made to the property and for the right to remain in the property on an assured tenancy after the lease expires.

The reforms will save leaseholders thousands to tens of thousands of pounds, providing them with greater security and control over the costs of home ownership. It is important to note that these reforms only apply to leaseholders in England.

Leaseholders will be able to take over management of their building more easily and cheaply

The Leasehold and Freehold Reform Act became law in the UK on 24 May 2024. The Act grants leaseholders greater rights, powers, and protections over their homes. One of the key provisions of the Act is to make it easier and cheaper for leaseholders to take over the management of their buildings.

Previously, leaseholders often faced challenges and obstacles when attempting to take over the management of their properties. The new legislation simplifies this process, allowing leaseholders to appoint a managing agent of their choice without having to prove bad management by the current agent. This empowers leaseholders to make decisions about the management and upkeep of their homes, giving them greater control over their living environment.

The right to manage is available to leaseholders of flats and applies when at least two-thirds of the flats are let to qualifying tenants. The process is straightforward and does not require the landlord's consent or a court order. Leaseholders can form a Right to Manage (RTM) company, take over certain management responsibilities, and make decisions on budgets, repairs, and service provisions.

To facilitate a smooth transition, the Act outlines specific procedures, including serving notices, inviting participation, and providing relevant information. Leaseholders also gain greater transparency over service charges, as freeholders or managing agents must issue bills in a standardised format. These measures ensure that leaseholders can effectively manage their buildings, promote good governance, and maintain their properties efficiently.

The implementation of the Leasehold and Freehold Reform Act is a significant step towards empowering leaseholders and providing them with the tools to take charge of their homes. By simplifying the process and reducing costs associated with management takeovers, the Act enhances the living experience for leaseholders across the country.

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