news | 2 weeks ago | Andreea Dulgheru

Leasehold and Freehold Reform Bill becomes law

The Leasehold and Freehold Reform Bill has officially become law, after receiving Royal Assent on Friday, 24th May.


The bill was tabled for final debate on Friday, the last day before parliament was prorogued ahead of the general election on 4th July.

The bill aims to make it easier and cheaper for leaseholders in England and Wales to extend their leases, buy their freehold, and take over management of their buildings.

Under the new law, leaseholders can increase the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats).

In addition, it promises leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged.

It will also ban the sale of new leasehold houses other than in exceptional circumstances, end excessive buildings insurance commissions for freeholders and managing agents, and scrap the requirement for a new leaseholder to have owned their house or flat for two years before they can buy or extend their lease, as well as raised the 25% non-residential limit in collective enfranchisement claims to 50%.

Over the past few months, several industry experts have showed concern about the Leasehold and Freehold Reform Bill, warning that the new law could potentially lead to some landlords being forced into insolvency.

Others have raised concerns regarding the new 50% non-residential limit in collective enfranchisement, claiming that this could lead to a fall in management standards due to inexperienced leaseholders taking control, and could jeopardize capital investment and rental income from commercial premises.

Commenting on the Leasehold and Freehold Reform Bill becoming law, Mark Chick, director at the Association of Leasehold Enfranchisement Practitioners (ALEP), said: “While the provisions of the Leasehold and Freehold Reform Act 2024 go some way to addressing a number of the issues that we and our members have mentioned for years (such as the two year qualification period and the position relating to successive claims), this is in some senses a ‘piecemeal’ piece of legislation, making radical changes to the valuation regime, to the detriment of freeholders and the advantage of leaseholders. 

“Our members welcome the general prospect of reform but, what we have with the LHFRA and the way in which it has been passed at the end of this parliament is a hurried set of changes.

“While we support the government’s commitment to lasting change in this area, [. . .] we would welcome prompt clarity about the likely timescales for commencement. 

“We do have some concerns that by pushing this bill through, quite literally as the last piece of business in this parliamentary session that there may be unintended consequences lurking.”

Robert Poole, director at Glide (part of Leaders Romans Group), commented: “For years, the leasehold system has been a topic of contention, leaving homeowners and managers of blocks of flats grappling with uncertainties. 

“The Leasehold and Freehold Reform Act [. . .] heralds a landmark shift in the leasehold system and a future in which homeowners are granted greater autonomy over their homes, with reduced costs and red tape.

“It is good news that the act has passed into legislation imminently, despite many other bills falling victim of the general election’s timing. 

“As leasehold reform moves forward, the changes will undoubtedly create some challenges — a thoughtful and comprehensive approach that consults widely with practitioners, leaseholders and freeholders and considers all potential challenges is necessary to make the transition as smooth as possible.”

Ian Fletcher, director of policy (real estate) at the British Property Federation, stated: “The Leasehold and Freehold Reform Act will possibly be one of the least celebrated laws ever; it has left few freeholders or leaseholders satisfied.

"It has not received proper scrutiny as many Peers in the House of Lords expressed passionately this afternoon, it infringes legitimate property interests significantly, and doesn’t tackle some of the primary problems leaseholders face.

"A lot of promises have been made that have not been delivered, in some cases thankfully, because they would have caused so much damage to the leasehold system. There will be future leasehold reform, but hopefully it will be considered more comprehensively and more collegiately.”

 

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