The Leasehold and Freehold Reform Act

Good News for Leaseholders and Homeowners

The Leasehold and Freehold Reform Act has become law. The Act, which has officially received Royal Assent – strengthens existing, and introduces new, consumer rights for homeowners by:

· Making it cheaper and easier for people to extend their lease or buy their freehold

· Increasing the standard lease extension term to 990 years for houses and flats

· Giving 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.

· Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.

· Making 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.

· Extending access to redress schemes for leaseholders to challenge poor practice. The government will require freeholders, who manage their building directly, to belong to a redress scheme so leaseholders can challenge them if needed.

· Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.

The Act will further benefit leaseholders by:

· Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice that currently acts as a deterrent when leaseholders want to challenge their service charges.

· Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees.

· Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.

· Removing the requirement for a new leaseholder to have owned their house or flat for 2 years before they can extend their lease or buy their freehold.

Source https://www.gov.uk/government/news/leasehold-reforms-become-law

Forthcoming legislation – Leasehold and Commonhold Reform Bill

In the King’s Speech 2024 the government committed to publish a draft Leasehold and Commonhold Reform Bill.

The bill would:

• enact remaining Law Commission recommendations to strengthen leaseholders’ rights to extend their lease, buy their freehold, and take over management of their building.
• reinvigorate the commonhold tenure by modernising the legal framework. Commonhold was introduced in 2002 as a way of enabling the freehold ownership of flats and avoiding the shortcomings of leasehold ownership. However, fewer than 20 commonhold developments have been established since the commonhold legislation came into force. The Law Commission put forward proposals for improving commonhold in 2020. The government intends to consult on options to restrict the sale of new leasehold flats so commonhold becomes the default tenure.
• regulate ground rents for existing leaseholders.
• strengthen the rights of freehold homeowners on private or mixed-tenure residential estates. The government will consult on the best way to achieve this.
• remove the threat of forfeiture as a means of ensuring compliance with a lease agreement.

The government intends to publish the draft legislation on leasehold and commonhold reform in the 2024-25 parliamentary session, so that it may be subject to broad consultation and additional parliamentary scrutiny.