Leasehold Reform

The Leasehold and Freehold Reform Bill, which was introduced to Parliament on 27 November 2023 and received Royal Ascent on 24 May 2024, is a significant piece of legislation that aims to reform the Leasehold sector.

The Government first talked about finding ways to make buying a freehold or extending a lease ‘easier, faster, fairer and cheaper’ six years ago.

This landmark Bill proposes a series of changes that could have far-reaching implications for leaseholders, landlords, and the property market as a whole. Here, we delve into the key provisions of the Act, which has become law although has not yet been implemented.

Removal of Marriage Value from Premiums

The Bill seeks to eliminate 'marriage value' from lease extension and enfranchisement calculations. This is a significant change, as it would reduce the cost, in some cases considerably, of extending a lease with under 80 years unexpired or enfranchising.

It would have significant implications for parts of the property market including increasing the price of some Leaseholds, whilst reducing the value, in some cases significantly, of Freeholders reversionary assets.

Extension of Lease Terms

The standard lease extension term for both flats and houses is proposed to increase to 990 years, from 90 years in flats and 50 years in houses. This change will provide long-term security for leaseholders.

Removal of Ownership Requirement

The Bill also proposes to remove the requirement for a new leaseholder to have owned their property for two years. This amendment would make it easier for new leaseholders to access the benefits of this leasehold reform.

Ban on the Sale of New Leasehold Houses

Under the proposed Bill, the sale of new leasehold houses will be banned. This means that, barring exceptional circumstances, all new houses in England and Wales will be freehold from the start.

Changes to the 'Non-Residential' Limit

The proposed legislation seeks to increase the 'non-residential' limit from 25% to 50%. This means that leaseholders in buildings with up to 50% non-residential floorspace, such as retail and offices, will be able to buy their freehold or take over its management.

Changes to Buildings Insurance Commissions

Under the proposed Bill, buildings insurance commissions for managing agents, landlords, and freeholders will be replaced with transparent administration fees.

The Leasehold and Freehold Reform Bill represents a major change for Leaseholders and Freeholders. One thing the Act did not introduce was the capping of existing ground rents.   

For more understanding of the proposed changes, please refer to the Guide to the Leasehold and Freehold Reform Bill on the GOV.UK website.