Homeowners receive more rights and powers as new leasehold reforms become law

Published on 26.06.24
Published on 26.06.24

The Leasehold Reform Act 2024 has now become law although only a few minor amendments to the Building Safety Act have so far come into force. Once in force, the new Act will make it easier for leaseholders to buy their freeholds, increase lease extensions to 990 years and provide greater transparency over service charges. Partner Christina Antonas looks at these and other new provisions in the Act.

As we wrote in a previous article, the new Act represents a significant and long-overdue reform of the leasehold system. The Act introduces a series of new rights and protections for leaseholders, including:

  1. It will be easier and cheaper for leaseholders to buy their freehold or extend their lease. Leaseholders will no longer need to live in their property for two years before exercising these rights. Also, leaseholders will not have to pay the freeholder’s costs when buying their freehold or extending their lease.
  2. The standard lease extension terms will be 990 years for houses and flats. Previously, it was 50 years for houses and 90 years for flats.
  3. Leaseholders will receive far greater clarity about service charges as freeholders and managing agents will be required to issue bills in a standard format. This will make it easier for leaseholders to scrutinise service charge demands and invoices and challenge them at a tribunal.
  4. The Act requires transparency on fees for placing insurance, and freeholders and/or managing agents will no longer permitted to receive commissions on insurance premiums.
  5. It will be easier and cheaper for leaseholders to take over their building’s management, enabling them to appoint their own managing agents.
  6. The redress scheme for leaseholders to challenge poor practice is being extended to freeholders who manage buildings directly. Managing agents are already required to belong to such schemes.
  7. It will be simpler for leaseholders to challenge unreasonable service charges and poor practice, and leaseholders will no longer have to pay the legal costs of any such challenge, nor can they be repassed through the service charge.
  8. Buying or selling leasehold properties should be quicker and cheaper as the new Act is setting a maximum time and fee for providing information on a sale (such as building insurance or financial records) to a leaseholder by the freeholder.
  9. The sale of leasehold houses under leases of more than 21 years is being banned. Apart from a few exceptions (such as retirement housing leases and leases granted out of historic leasehold estates), all new houses sold in England and Wales must be freehold sales.
  10. No “marriage value” will be payable by leaseholders who extend their leases. Marriage value is the rise in value of a property following the completion of a lease extension and represents the increased market value of the longer lease. Previously, for leases with more than 80 years to run, this could significantly increase the cost to a leaseholder of extending their lease. Under the new Act, “marriage value” will be ignored when determining the price payable for a lease extension.

The next government will need to decide when the rest of the Act will come into force, which will most probably be done in stages in the months and years ahead. We will issue an update as and when provisions of the Act come into force.

If you have any queries about any of the provisions of the new Act or about lease extensions, enfranchisement or service charges, please contact Christina Antonas at [email protected].

Disclaimer: The above is merely general guidance and should not be relied on as formal advice. We suggest you take professional legal advice before taking any action in relation to the issues discussed above.