Introduction
The Leasehold and Freehold Reform Act 2024 marks a significant milestone in the ongoing effort to modernise property ownership in the UK. This legislation introduces sweeping changes aimed at addressing long-standing issues in the leasehold sector, providing greater rights and protections for leaseholders, and simplifying the processes involved in leasehold and freehold transactions.
Key Changes Introduced By the Act
1. Ban on New Leasehold Houses One of the most prominent changes is the ban on the creation of new long residential leases for houses. This reform seeks to phase out leasehold houses entirely, addressing concerns that leasehold ownership can be exploitative. Under the new law, new houses must be sold as freehold unless they fall into specific permitted categories, such as community land trusts or similar arrangements.
2. Simplified Lease Extensions and Freehold Acquisitions The Act makes it significantly easier and cheaper for leaseholders to extend their leases or acquire the freehold of their properties. Statutory lease extensions will now be for 990 years, up from the previous 90 years for flats and 50 years for houses. Additionally, the two-year ownership condition for initiating these claims has been abolished, allowing leaseholders to act sooner.
3. Introduction of Permitted Leases While new leasehold houses are generally banned, the Act allows for certain exceptions under “permitted leases.” These exceptions include leases granted by community housing providers or under specific conditions that require tribunal or self-certification. This provision ensures that certain specialist housing needs can still be met while maintaining strict regulatory oversight.
4. Enhanced Rights and Protections Leaseholders gain enhanced rights and protections under the new Act. For example, tenants under shared ownership schemes, who have not fully staircased to 100% ownership, can now extend their leases. The Act also introduces stronger measures to protect leaseholders from exploitative practices by providing clearer guidelines and enforcement mechanisms.
5. Changes to Collective Enfranchisement The Act also streamlines the process of collective enfranchisement, where multiple leaseholders come together to purchase the freehold of their building. New rules make it easier for leaseholders to manage and finance these transactions, enhancing their ability to take collective control of their properties.
The Leasehold and Freehold Reform Act 2024 has broad implications for both landlords and tenants. For landlords, the ban on new leasehold houses will require adjustments to their business models and sales strategies. They must also navigate the new rules around permitted leases and ensure compliance with enhanced regulatory requirements.
For tenants and leaseholders, the reforms offer a pathway to greater ownership and control over their homes. The ability to extend leases for up to 990 years and the simplified process for acquiring freehold status provide significant long-term security and financial benefits.
Conclusion
The Leasehold and Freehold Reform Act 2024 represents a landmark change in the UK property market, aiming to create a fairer and more transparent system for all parties involved. By eliminating exploitative practices and simplifying legal processes, the Act seeks to empower leaseholders and ensure that property ownership is equitable and sustainable.