Leasehold and Freehold Reform Act 2024  

What is the Leasehold and Freehold Reform Act 2024 (Act) 

This Act revisits the existing legislation which gives leaseholders a right to force their landlord to extend the term of their lease and to reduce the rent to nil in return for the payment of a premium. This is known as a statutory lease extension claim. It also revises a leaseholder’s right to acquire the freehold of their house or a group of leaseholders to acquire the freehold of their building. 

This Act received Royal Assent on 24 May 2024. 

Whilst the Act does change the position in relation to certain specialist types of lease, such as shared ownership leases, this note focuses on “standard” long leases of flats. 

What will the Act do? 

In relation to statutory lease extension claims, the Act is intended to make it easier for leaseholders to extend their leases by, amongst other things: 

• removing the two-year qualifying period before a claim can be made 

• increasing the period of a lease extension from 90 years to 990 years (or from 50 years for leasehold houses to 990 years) 

• significantly reducing the circumstances in which a lease of a house can be granted 

• reducing the price payable for a lease extension by removing marriage value (this is the technical term given to the increase in price when a lease term drops below 80 years) 

• changing the position on costs so that leaseholders are only required to meet the landlord’s costs in very limited circumstances 

The Act also a new claim which allows a leaseholder to require their landlord to reduce their rent to a peppercorn without extending the lease term. This is likely to be of particular interest to leaseholders with escalating ground rents finding it difficult to remortgage or sell their lease 

Is the new law in force? 

Although the Act has received Royal Assent, the matters which relate to leasehold reform are not yet in force.  Whilst we do not know at this stage when the position will change, many commentators consider that this will not be until at least 2025 and possibly 2026 which aligns with the previous Government’s own impact assessment. 

There are several reasons for the delay: 

• the new Government has inherited the legislation and wishes to take reforms further than are currently envisaged. The King’s Speech included reference to a Leasehold and Commonhold Reform Bill for which there is currently no detail 

• enabling legislation is required to bring parts of the Act into force 

• many of the measures in the Act will require further consultation and secondary legislation before they apply 

What should I do if I am considering a lease extension 

This will largely depend on your specific circumstances. In general, because the cost of extending your lease goes up because your lease term goes down, you may well need to consider proceeding with a lease extension before the changes come into effect. The tipping point for the cost of a lease extension beginning to escalate is 80 years and so if you are selling or mortgaging because your lease term is close to 80 years then it is unlikely you will be able to wait until the new provisions are in force. If, however, you have no such incentive because you have a lease term much longer than 80 years or your lease term is already below that, you may wish to wait it out and see what happens next year.  

The Act will not apply to claims that have already been served and so you may wish to continue with an existing claim unless you can afford to withdraw that claim and wait (withdrawing means you will have to wait 12 months before you can serve a new claim and you remain liable for the landlord’s costs). 

Some things to bear in mind 

One of the new benefits of the Act will be that if a claim is withdrawn, or deemed withdrawn, you will not have to wait another 12 months to serve a fresh claim for an extended lease.  In addition, under the Act, a leaseholder will not have to have been registered at HM Land Registry as the legal owner for a minimum of two years before they can serve a notice claiming an extended lease.  This will assist with flat sales because a buyer will immediately qualify under the Act. 

Summary 

There is, unfortunately, still great uncertainty as to whether leaseholders should extend now or wait. 

The Act, whilst improving the position for leaseholders (particularly those who need to sell or remortgage), omits much of the detail needed to advise leaseholders fully. As it may be some time until its provisions are in force, we are still therefore in a period of instability. 

What we do know is that the existing regime remains in place which entitles leaseholders to extend their lease by 90 years, for the ground rent to be reduced to nil and for a leaseholder to be responsible for the majority of a landlord’s costs. Whilst imperfect, the existing legislation is, at least, certain.