Leasehold property ownership has long been a much-debated issue in the UK, with leaseholders facing rising ground rents, complex rules, and significant costs to extend leases or buy their freehold. In this article, we’ll break down the key aspects of leasehold reform in 2024, the current state of play and what these changes mean for leaseholders.
Leasehold Reform Act: Key facts
The leasehold reform measures proposed for 2024 are part of an ongoing effort to fix the leasehold system. The reform includes a number of significant proposals like:
Lease terms for houses and flats will increase to 990 years, with ground rent reduced to zero
The removal of ‘marriage value’ and the two-year ownership requirement to extend leases or buy freeholds
Leaseholders can manage buildings with up to 50% non-residential space
Service charges must be clear and comparable
Building insurance commissions will be replaced with transparent fees
Leaseholders can challenge poor practices without paying freeholders’ legal costs
A ban on new leasehold houses
Freeholders and developers are accountable for building remediation
What does the act not include?
While the proposed leasehold reform covers several major issues, there are a few key exclusions and limitations:
Retrospective ground rent abolition: While new leases are protected from escalating ground rents, the reform does not yet address existing leases with onerous ground rent terms.
Service charge protections: There are currently no detailed measures to regulate service charges or ensure greater transparency, leaving some leaseholders vulnerable to high fees.
Commonhold incentives: Although commonhold ownership - an alternative to leasehold - is part of the discussion, no widespread mechanisms to incentivise its adoption have been finalised.
Implementation delays: As with any legislative change, the transition period for existing leaseholders remains uncertain, leaving many in limbo.
What’s the latest Leasehold Reform news?
The Leasehold and Freehold Reform Act became law in May 2024. However, by Autumn 2024 it had still not come fully into effect. As a result, the new Labour government pledged to act quickly on this. And in November 2024, the government set out a timeline of what to expect to happen.
Latest leasehold reform timeline: What’s happening and when?
The UK government released an update on 21 November 2024, outlining the next steps for the Leasehold and Freehold Reform Act. Keep an eye on government announcements for more details as the reform starts to take shape. For now, here’s a breakdown of what’s expected and when:
January 2025
The government plans to remove the current two-year restriction on making enfranchisement and lease extension claims following the purchase of a property. This change aims to make the process more accessible for leaseholders.
Spring 2025
New provisions on the Right to Manage will come into effect. These changes will make it easier for leaseholders in mixed-use buildings to access the Right to Manage, alongside reforms to associated costs and voting rights.
Summer 2025
A consultation will be launched to review the valuation rates used for calculating enfranchisement premiums. This step will require Parliament to approve secondary legislation that sets out the details. Additionally, the government has acknowledged the need to address flaws in the current Act through further primary legislation before fully implementing the proposed changes.
Later in 2025
The government intends to consult on implementing the Act’s new consumer protection measures for homeowners on freehold estates. This includes reforms related to service charges and legal costs. Following the consultation, the aim is to bring these measures into force as quickly as possible to enhance protections for homeowners.
The timeline so far
Year | Summary |
|---|---|
2017 | The government announced its intention to tackle unfair practices in the leasehold sector, marking the start of the reform journey. |
2019 | The Law Commission began reviewing leasehold law, publishing key recommendations to simplify lease extensions and improve leaseholder rights. |
2022 | The Leasehold Reform (Ground Rent) Act 2022 came into force, abolishing ground rent for most new residential leases. |
2023 | The government confirmed its plan to phase out leasehold ownership for houses and address the 'marriage value' issue. |
2024 (expected) | The next phase of reforms is expected to be debated and potentially enacted. |
Should you extend your lease now?
For leaseholders considering whether to extend their lease now or wait for the reforms, the decision depends on several factors:
Reasons to extend | Reasons to wait |
|---|---|
Avoid the marriage value trap: If your lease is approaching 80 years, extending it now prevents the costly marriage value from applying. | Potential cost saving: If marriage value is abolished, extending your lease under the reformed system could be significantly cheaper. |
Secure your investment: A longer lease protects the value of your property, especially for resale purposes. | Uncertainty: Waiting for the reforms provides clarity on the exact costs and process under the new law. |
Market stability: Extending now ensures you lock in current costs, avoiding potential price increases in the future. |
What should you do?
Before you take any action, consult a legal expert to evaluate your lease length, the associated costs and the potential benefits of waiting for the reforms. A dedicated lease extension solicitor will be able to provide you with thorough legal advice on what your best next steps are.
FAQs
What are my options as a leaseholder?
As a leaseholder, you have several options:
Extend your lease: Add 90 years to your lease term to secure long-term ownership.
Buy the freehold: Purchase the freehold of your property (individually or collectively with other leaseholders).
Wait for reform: Monitor upcoming reforms to determine the most cost-effective course of action.
What does leasehold reform mean?
Leasehold reform refers to proposed changes in the law to address the disadvantages faced by leaseholders. The key goals include:
Simplifying lease extensions
Eliminating unfair ground rent practices
Reducing the financial burden of leasehold ownership
Is leasehold going to be abolished?
The complete abolition of leasehold is unlikely in the short term. However, the reforms aim to phase out leasehold for houses and promote commonhold ownership as a replacement for flats.
Will marriage value be abolished?
Marriage value is a significant focus of leasehold reform. Current proposals indicate it may be abolished, reducing costs for leaseholders with short leases. However, confirmation is still pending.
Final thoughts
Leasehold reform in 2024 represents a turning point for the UK property market, with significant changes on the horizon for leaseholders. While the exact timeline remains uncertain, the reforms aim to simplify lease extensions, abolish unfair charges and provide greater security for homeowners.
Get expert property advice
The Leasehold and Freehold Reform Act brings significant changes for property owners, giving them more rights, power, and protection over their homes. Wondering how these new laws affect you as a property owner? Lawhive is here to help, get in touch to work with one of our expert property law solicitors.