Leasehold and Freehold Reform Act Becomes Law in England and Wales

The Department for Levelling Up, Housing and Communities said in its announcement that homeowners will receive more rights, power and protections over their homes under the Act.

What the Act changes

The standard lease extension term increases to 990 years for both houses and flats, up from 50 years for houses and 90 years for flats. The requirement for a new leaseholder to have owned their house or flat for two years before extending the lease or buying the freehold is removed. The government says extending a lease or buying a freehold will become cheaper and easier.

Freeholders and managing agents will have to issue service charge bills in a standardised format that can be more easily scrutinised and challenged, and barriers to leaseholders challenging unreasonable charges at the tribunal are removed. Excessive buildings insurance commissions for freeholders and managing agents will be replaced with transparent and fair handling fees.

Leaseholders in mixed-use buildings also benefit. At present, a building cannot be taken over through the Right to Manage or collective enfranchisement if more than 25% of its floor space is commercial, such as ground floor shops or offices. The Act raises that limit to 50%. Freehold homeowners on private and mixed tenure estates gain the same rights of redress as leaseholders and equivalent rights to transparency over estate charges.

Who is affected

The changes affect leaseholders, freeholders, landlords, managing agents, developers and investors in residential ground rents. Housebuilders will need to plan for new houses being sold as freehold from the outset. Managing agents and landlords will need to prepare for standardised service charge reporting and the new approach to insurance remuneration.

What happens next

Royal Assent does not bring every measure into force at once. Many provisions will be brought into force later by commencement regulations, and some depend on further secondary legislation. Leaseholders considering an extension or freehold purchase, and landlords and managing agents, will need to follow the commencement timetable closely to understand when each change takes effect.

Sources

• GOV.UK: Leasehold reforms become law
• legislation.gov.uk: Leasehold and Freehold Reform Act 2024