New rights for leaseholders – but not just yet

The Leasehold and Freehold Reform Act 2024 squeaked onto the statute books immediately before the dissolution of Parliament in anticipation of the general election, but its reforms to leaseholders rights are not yet in force.  Whether they are implemented at all will depend on the inclination and priorities of the incoming Government - of whatever political hue. 

When fully in force the Act will:

• Ban long leases of houses (over 21 years) subject to limited exceptions such as: retirement housing; some National Trust property; shared ownership leases with stair-casing rights and  where houses are part of a Farm Business Tenancy or agricultural holding
• Make enfranchisement or lease extension cheaper and easier for leaseholders by changing the valuation formula, abolishing “marriage value” and removing the 2-year ownership qualification period
• Allow those leaseholders of a house or flat who have the right to extend their lease to extend it by an additional  990 years, rather than 50 years as now for a house, or 90 years for a flat
• Give leaseholders more transparency over service charges and additional rights to challenge management costs
• Mean that long residential leaseholders in mixed use buildings will qualify for enfranchisement or the Right to Manage unless more than 50% of the building is in commercial use (up from 25%)
• Limit buildings insurance commissions
• Reduce barriers for leaseholders who want to take over management of their building and allow them to choose an alternative managing agent.

Missing from the Act is:

• any provision for the abolition or capping of existing ground rents reserved by leases granted before 30 June 2022, when ground rents were outlawed for new leases by the Leasehold Reform (Ground Rents) Act 2022. Significantly, the outcome of the consultation Modern leasehold: restricting ground rent for existing leases - GOV.UK (www.gov.uk) has not been published. Possibly an indication of complexity of the issues and competing interests involved
• any reform of the law of forfeiture of residential leaseholds.

Many of the provisions in the Act will require further clarification and the drafting of secondary legislation to determine how they will work in practice. So even if adopted with determination by the incoming administration they are not expected to take effect before 2025 or 2026.

Renters (Reform) Bill

Finally, in relation to short term residential tenancies, the Renters (Reform) Bill became a casualty of the sudden decision to call a general election and was lost when Parliament was dissolved. So neither the abolition of s.21 Notices and ‘no fault eviction’, nor the new right for tenants to keep a pet (with landlords consent not to be unreasonably withheld), will be implemented unless taken up by the new Government.  Depending on the election outcome, residential tenancy reform may resurface in a somewhat different manner from that proposed in the Bill.  But the conundrum of how to give tenants more security without provoking an exodus of private landlords and so less properties available for rent will remain, whoever is in power after 4 July. 

Homeowners will receive more rights, power and protections over their homes under the Leasehold and Freehold Reform Act

https://www.gov.uk/government/news/leasehold-reforms-become-law