The Leasehold and Freehold Reform Act 2024 - Important update on the implementation of reform

The Leasehold and Freehold Reform Act 2024 (“the Act”) received Royal Assent during the wash-up before the dissolution of the last Parliament in May 2024. This means it was enacted before all specific elements could be included.

The Act seeks to introduce fundamental changes to the valuation methodology and legal process with the aim to make it cheaper, fairer and more transparent for leaseholders to extend their leases and purchase their freeholds.

However, very few sections were implemented in July and October last year. Most of the reforms relating to enfranchisement to help protect leaseholders have not yet been implemented, leaving leaseholders unsure as to when or if they will ever see the benefit of the much-needed reforms.

Key provisions of the Act include:

• An increase in the standard lease extension term for houses and flats to 990 years
• The ability to extend your lease immediately upon acquiring the property (abolishing the previous two year ownership requirement)
• Removal of marriage value from the cost calculation for leasehold enfranchisement (which makes it much more expensive to extend the lease if there is less than 80 years remaining on the term)
• An increase in the percentage of no-residential floor space (25% to 50%) which can be present in mixed use buildings before leaseholders can take over the management of their building (right to manage)
• The Landlord and Tenant Act 1985 will be amended to include new protections for leaseholders.

On 21 November 2024, the Minister of State for Housing and Planning provided a long awaited update on the implementation of the Leasehold and Freehold Reform Act 2024 providing a timeframe of when the next stages will either be consulted on or implemented.

The government’s intended sequencing of the provisions for the implementation of the Act are as follows:

• Qualifying criteria: removal of the ‘2-year rule’ in January 2025. This came into force at the end of January 2025.
• Right to Manage (RTM): a coherent package on the right to manage provisions in Spring 2025.
• Service charges and costs: provisions relating to challenging service charges and legal costs will be consulted on in 2025 with the aim to bring them into force as quickly as possible.
• Calculator: in Summer 2025, consultation will begin on the valuation rates used to calculate the cost of premiums which will then need to be approved in secondary legislation setting out the details of the calculator.
• Consumer protection: 2025 will see consultation on implementing the new consumer protection provisions to enable homeowners who pay an estate management charge to have better access to information and the right to challenge the reasonableness of the charges, and if required, the ability to apply to the First-tier Tribunal to appoint a substitute manager.

In addition, Parliament set out their provisions for further reform to include additional recommendations set out in the Law Commission’s report which failed to appear in the Act. The further reforms relate to the publication of the first draft of the Leasehold and Commonhold Reform Bill during this parliamentary session. These include but are not limited to:

• Ground rents: tackling unregulated and unaffordable ground rents.
• Service of Managing Agents: the poor quality of services provided by some managing agents.
• Fleecehold: the prevalence of ‘fleecehold’ private and mixed-tenure housing estates, referring to estates where, owing to the mix of tenure, a service charge cannot be implemented for the maintenance of common areas such as parks, roads, play areas etc.
• Commonhold: decisive first steps to making commonhold the default tenure by the end of parliament with consultation next year on the best approach to banning new leasehold flats to work alongside a robust ban on leasehold houses.

Whilst the statement does not set out a timetable of bringing in all of the reforms contained in the Act, it does go a long way in addressing the issues and setting a timeframe on when leaseholders can expect the necessary reforms to be implemented.

If you have any questions regarding the changes within the Leasehold and Freehold Reform Act 2024, or you would like to extend your lease, buy the freehold or commence a Right to Manage claim, the specialist leasehold enfranchisement team at Martin Tolhurst Solicitors can offer expert advice and guidance.