On Friday 24 May 2024, the Leasehold and Freehold Reform Act 2024 (the “Act”) became law.
Although it is now law, it’s yet to come into effect. The date of when it will come into effect is unknown, but it is anticipated to be around 2025-2026.
The background
In November 2023, the government announced that it intended to reform Leasehold.
At the outset, it was anticipated that the reforms would, among other things, remove leasehold and ground rents. Whilst that has not occurred in the absolute sense, reform has taken place.
What has changed/will change?
The Act will:
- Make it easier and cheaper for leaseholders to buy their freehold.
- Increase the standard lease extension from 50 years/90 years to 990 years
- Remove the minimum occupancy of 2 years rule (before applying for a lease extension)
- Ban the sale of new leasehold houses (Shared Owners and some other exceptional circumstances are excluded from this)
- Provide greater transparency over service and estate charges by having information presented in a standardised format.
- Making it cheaper and easier for leaseholders to take over the management of their building.
- Making buying and selling a leasehold property quicker and easier by setting a maximum time and fee for the home buying and selling information.
- Provide those on mixed tenure sites the same rights to challenge
The date of when it will come into effect is unknown, but it is anticipated to be around 2025-2026. More information on how the Act will be applied will be released by the government in due course and that will help us understand how to apply these changes.
This decision comes down to your own personal circumstances, as there a lot of factors that could influence your decision to extend your lease. It might be a particular concern if you’re thinking of moving soon and have a short term left on your existing lease. You also need to consider that the cost to extend a lease will increase the more the current term decreases.
The other point to consider when making a decision is that if you decide to delay a lease extension, waiting for these reforms to become law, there’s no specific timeframe of when that might happen.
A decision needs to be based on your own personal circumstances. We advise you seek expert advice before making a decision.
Check the term of your lease is already 990 years as the government introduced changes to new leases in 2022. The existing term of the lease you are buying will likely determine how you choose to proceed and what advantages/disadvantages there are for you in your personal circumstances.
If you’re extending on a statutory basis then it’s not possible to pause, you would either need to complete the process or withdraw.
If you’re doing so on a voluntary basis, then you may wish to consider requesting a pause on the application. We strongly recommend you seek expert advice before doing so, as it may have other implications on your application.
Whilst the Act is now law, there is still lots more information to come from the government about how it should be applied. We have taken the decision to hold off extending leases (on a voluntary basis) until the Act comes into effect and further guidance is issued.
If you have any questions about the leasehold reform or would like to talk to us about any of the changes we’ve made, you can speak to a member of our Housing Advice Team by calling 0345 60 20 540.
You can also take a look at the Home Owners Alliance website.
