The new Leasehold and Freehold Reform Act 2024 which became law on 24th May 2024 (but not yet in force as awaiting further guidance and secondary legislation) is designed to assist leaseholders by making it simpler to enfranchise (buy) their freehold or apply to extend their lease.
Instead of getting 90 years (or 50 if a house), a leaseholder will be able to extend for 990 years for houses and flats.
The Act also changes the way leaseholders can challenge the reasonableness of their service charges.
In future landlords will not be able to sell houses as leasehold properties other than in exceptional circumstances.
WAIT NOT MORE
Further, leaseholders will no longer have to wait two years before applying to extend their lease and the presumption that a landlord’s costs will be paid by the leaseholder applying to enfranchise, or extend, will also be abolished.
The charges incurred under a lease on sale are also to be revised. We currently await the secondary legislation to proceed.
LONGER EXTENSIONS
Once the Act is in force it should make it cheaper for people with leases below 80 years or with a high ground rent to extend their leases and allow longer extensions of 990-years.
There is no guarantee that it will make lease extensions cheaper for people with leases above 80 years who don’t have a high ground rent. For these people, it is possible it will make it more expensive.
Leaseholders claiming the right to manage their building will be able to do so provided no more than 50% of a building’s total floorspace is in non-residential use, which is an increase from the current and rather arbitrary limit of 25%, albeit that this is still subject to debate.
WELCOME CHANGE
One welcome change will be that those people who are subject to estate charges will finally be able to challenge the reasonableness at Tribunal.
For years this has been a strange anomaly meaning that landlords have been able to avoid being challenged over estate charges and now will have to be open and transparent over the charges and the work done to maintain their estates.
There is a redress scheme proposed to ensure all leaseholders are provided with more information of the charges and banning excessive insurance commissions, plus provision of more information on how to challenge those charges if dissatisfied.
SECONDARY GUIDANCE
The Government announced that this secondary guidance and legislation will be provided in January 2025 to come into force in the Spring and is eagerly awaited by many leaseholders.
The most discussed part of the Act is the end of section 21 “no fault” evictions. Tenants are delighted with this proposal but many landlords, particularly those with just one or two properties are concerned they will be unable to remove problem tenants, or tackle anti-social behaviour.
It is likely that there will be an increase in injunctive proceedings to tackle these issues rather than possession, but we await the guidance to understand the detail.
FAR REACHING
A second Bill, the Leasehold and Commonhold Reform Bill is also awaited but no draft has been provided so far. This Bill is likely to be more far reaching and include many of the changes that didn’t make it into the previous legislation, for example banning new leasehold flats and promoting Commonhold tenure. This proved very unpopular when introduced previously with hardly any schemes in existence.
Also regulation of ground rents and the amount but not necessarily abolishing ground rent and the abolishment of forfeiture for breach of lease.
Sarah Mansfield is Landlord & Tenant Partner at Excello Law
