Real Estate
Private Wealth
Electra Kallidou
June 2024
The Leasehold and Freehold Reform Act 2024 marks a significant shift in the landscape of home ownership in England and Wales. This legislation is designed to empower homeowners, providing them with increased rights, greater transparency, and enhanced protections. As a law firm committed to supporting our clients in navigating complex property issues, we are here to break down the key aspects of this transformative Act.
Empowering homeowners with greater rights and protections
One of the most notable changes is the simplification of the process for leaseholders to buy their freehold. Historically, this process has been both complex and costly. The new legislation makes it easier for leaseholders to secure ownership of their homes and reduces the expenses involved. Additionally, the standard lease extension terms have been extended to 990 years for both houses and flats, up from the previous 50 years for houses and 90 years for flats. This change ensures that leaseholders can enjoy long-term security without the ongoing stress and financial burden of future extensions.
Facilitating the Right to Manage and collective enfranchisement
Leaseholders will now find it much easier to take over the management of their buildings, with the floor space limit for Right to Manage and collective enfranchisement being increased from 25% to 50% of commercial space. This will allow more leaseholders to exercise control over their properties, by appointing their preferred managing agent or collectively buying the freehold.
Streamlined processes for lease extensions and freehold purchases
New leaseholders were previously required to own their property for two years before they could extend their lease or buy the freehold. The Act abolishes this requirement, giving new homeowners immediate rights to extend leases or purchase freeholds, thereby simplifying and expediting these processes.
Enhanced transparency and fairness in service charges
Transparency over service charges has long been a contentious issue between leaseholders and freeholders. The Act mandates that freeholders and managing agents issue bills in a standardised format, allowing leaseholders to scrutinise and challenge these charges more effectively. This move towards greater transparency is a significant step in addressing unclear and often unjustified service charges.
Increased rights to challenge unreasonable practices
The Act empowers leaseholders to challenge their landlords’ unreasonable charges at the Tribunal without the deterrent of covering their freeholders’ legal costs. This change is expected to encourage more leaseholders to stand up against unfair practices, fostering a more balanced relationship between leaseholders and freeholders.
Rights for freehold homeowners on private and mixed tenure estates
For freehold homeowners on private and mixed tenure estates, the Act extends similar rights of redress that leaseholders enjoy. This includes greater transparency over estate charges and the ability to challenge their reasonableness. The legislation ensures that homeowners are well-informed about the charges they incur and can dispute unfair costs.
Banning new leasehold houses and excessive insurance commissions
In a bid to curtail the practice of selling new houses as leaseholds, the Act bans this practice except in exceptional circumstances. This move guarantees that future homeowners will generally acquire freehold properties, ensuring full ownership rights from the outset. Moreover, the Act addresses the issue of excessive buildings insurance commissions by banning opaque and excessive fees, replacing them with fair handling fees.
Conclusion
The Leasehold and Freehold Reform Act is a landmark piece of legislation that significantly enhances the rights and protections for homeowners in England and Wales. By making it easier and cheaper to extend leases, buy freeholds, and challenge unreasonable charges, the Act aims to create a fairer and more transparent property market.
However, while the Act has received Royal Assent, numerous pieces of secondary legislation will be needed in order to clarify the exact, day-to-day application of these changes in practice. It is currently unclear when this additional legislation will be passed.
At Lawrence Stephens we are dedicated to helping our clients navigate these changes and leverage their new rights effectively. If you have any questions or need assistance regarding the implications of this Act, please do not hesitate to contact our specialised Residential and Leasehold Enfranchisement team.
