The Leasehold and Freehold Reform Act achieved Royal Assent on the 24th May

The Leasehold and Freehold Reform Act was promised in the Conservative manifesto at the last election.  It finally achieved Royal Assent on the 24th May 2024.

Under the Act, homeowners will be given “more rights, power and protections” for homes bought either a leasehold or a freehold.

What changes will be brought in by The Leasehold and Freehold Reform Act?

First and foremost, the Act makes it easier (and cheaper) for leaseholders to buy their freehold and  increase the standard terms of a lease extension to 990 years for houses and flats.

The Act also forces freeholders to be more transparent over service charges and gives leaseholders additional license to challenge their freeholder in a tribunal if they feel any of their charges are unreasonable.

Other notable points include:

• The sale of new leasehold houses is now banned except in exceptional circumstances.
• There can be no more excessive buildings insurance commissions for freeholders and managing agents.
• Freeholders or managing agents must now issue bills in a standardised format so they can be more easily scrutinised and, by extension, challenged.
• New leaseholders no longer have to wait two years before they can buy or extend the lease on their house or flat.
• Freehold homeowners on private and mixed tenure estates now have the same rights of redress as leaseholders and equivalent rights to leaseholders in relation to estate charges.
• It is easier for leaseholders to take over the management of their property should they want to (these charges often deter leaseholders from challenging unfair service charges).
• Previously taking over the management of a property was not possible if 25% of its floor space is commercial, this has been increased to 50% under the Act to allow more homeowners to enjoy the Right to Manage or the right to a collective enfranchisement.
• If enfranchisement rights are called the freeholder will no longer have to pay their costs when making a claim.

It is also felt the Act has both strengthened a homeowner’s existing consumer rights and introduced some new rights.

These new rights should make the most challenging aspects of free or leasehold – extending their lease, buying their freehold, understanding and challenging service charges, taking over the management of their building and exercise enfranchisement rights – easier and more affordable.  Overall, it is felt that together, these improved rights will afford homeowners greater security.

What are the next steps for leaseholders?

The reforms leasehold reforms are now in place but as the changes are still quite new it will take some time for everyone adjusts to the changes.

We would suggest leaseholders with shorter leases (i.e. under 80 years) should seriously consider extending their lease or look to purchase the freehold for their property given the reforms have introduced a much more favourable terms for leaseholders.

However, there is a degree of ‘buyer beware’.  You must make sure you are getting a fair deal if you do decide to purchase your freehold.  This is where you should take advice from an experienced residential professional.

We appreciate the legal position around leasehold and freehold can be complicated so if you’d like to discuss your own situation (related to either an existing property or a future purchase) , please contact our property team today.