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Leasehold and Freehold Reform Act

by | Jun 17, 2024 | Clients

Last month, the UK government passed the Leasehold and Freehold Reform Act.

According to the government news release, the Act will make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges. The Act will also remove barriers for leaseholders to challenge their landlords’ unreasonable charges at Tribunal.

For investors, the key point is that the Act removes the requirement for a new leaseholder to have owned their house or flat for 2 years before they can extend their lease or buy their freehold. Also, buying or selling a leasehold property will become quicker and easier because they are setting a maximum time and fee for home buying and selling information.

The Act – which has officially received Royal Assent – strengthens existing, and introduces new, consumer rights for property owners by:

  • Making it cheaper and easier for people to extend their lease or buy their freehold so leaseholders pay less to have more security in their home.
  • Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats), so leaseholders can enjoy secure ownership without the hassle and expense of future lease extensions.
  • Giving leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged.
  • Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
  • Making it cheaper for leaseholders to exercise their enfranchisement rights as they will no longer have to pay their freeholder’s costs when making a claim.
  • Extending access to redress schemes for leaseholders to challenge poor practice. The government will require freeholders, who manage their building directly, to belong to a redress scheme so leaseholders can challenge them if needed – managing agents are already required to belong to a scheme.
  • Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.

The Act will further benefit leaseholders by:

  • Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice that currently acts as a deterrent when leaseholders want to challenge their service charges.
  • Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees.
  • Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.

For more information, you can read the full news story on the government website.