The Leasehold Reform Act 2024 marks a significant turning point in property law, aiming to enhance the rights of leaseholders and curb exploitative practices in England and Wales. With around five million homes under leasehold arrangements, the Act seeks to address long-standing concerns about excessive charges, restrictive terms, and the complexities of lease extensions and enfranchisement.
Key Provisions and Implementation Timeline
1. Extended Lease Terms (Effective from January 2025)
Leaseholders can now extend their leases for 990 years, a substantial increase from the previous 50 years for houses and 90 years for flats. This change provides long-term security and eliminates concerns about diminishing lease terms.
2. Easier Freehold Purchase (Effective from 31 January 2025)
The Act abolishes the two-year ownership requirement, allowing leaseholders to purchase their freehold immediately after acquiring a property.
3. Ban on Leasehold Houses (Expected by Late 2025)
New houses can no longer be sold on a leasehold basis, ensuring that all newly built houses are freehold by default. This prevents developers from imposing unnecessary leasehold arrangements.
4. Transparency in Service Charges (Consultation in 2025, Implementation TBD)
Leaseholders will benefit from greater transparency regarding service charges, making it easier to challenge unreasonable costs. The government will consult on these reforms in 2025, aiming to implement them as soon as possible thereafter.
5. Reforming the Right to Manage (Spring 2025)
Leaseholders in mixed-use buildings will have improved access to the Right to Manage, allowing them to take control of building management more easily. The permitted commercial property element in mixed-use buildings will increase from 25% to 50%.
6. Changes to Valuation Methods (Consultation in Summer 2025)
The Act removes the controversial marriage value, which previously inflated the cost of lease extensions. However, deferment and capitalisation rates will still be set by future regulations, with consultations expected in summer 2025.
Impact on Leaseholders and the Housing Market
The Leasehold Reform Act 2024 is expected to reduce costs for leaseholders, increase homeownership security, and curtail exploitative practices by freeholders. While some provisions require secondary legislation for full implementation, the Act represents a major step toward ending the feudal leasehold system.
As the government continues to refine and enforce these reforms, leaseholders should stay informed about upcoming changes and how they may affect their rights.
Solicitors dealing with finances around divorce and separation will need to have this on their radar since it could affect one of the main assets a family has; their home.