The Leasehold and Freehold Reform Bill 2024

The Leasehold and Freehold Reform bill was one of the last pieces of legislation to make it through Parliament on Friday 24^th May 2024 before it was shut down for 4^th July’s general election.

It is said to have been a “rushed through” piece of legislation and whilst the Bill has passed it is not yet in effect and we await a commencement date.

Baroness Scott’s letter back on 15^th April 2024 suggested that most of the Bill will likely come into effect in 2025-2026 however the Leasehold and Freehold Reform Bill Impact Assessment suggests some of the reform may not be “operational” until 2028 – so this is likely something the new Government will need to “pick back up” and more information on when these reforms will be enacted are awaited.

The new Bill makes the following amendments to the current law under the Leasehold Reform, Housing and Urban Development Act 1993:

1. Abolishes marriage value – this benefits those with leases that have fallen under 80 years only and makes the premium to extend those with short leases much cheaper. This is a highly contentious change to leasehold law and it is still unknown whether freeholders will challenge this part of the new Bill in the Courts.
2. Changes the standard valuation method and market rates – the Bill caps the treatment of ground rents in the valuation calculation at 0.1% of the property value and allows the Government to prescribe the rates used to calculate the extension and enfranchisement premiums. However the Bill does not include as yet the prescribed rates and therefore we still do not know how valuations/calculations will be affected by the new Bill and whether this will be to the benefit of leaseholders or freeholders.
3. Extend leases to 990 years – the 1993 Act currently gives a right for leaseholders to extend their lease by 90 years – the new Bill extends this right to longer 990 year lease extensions.
4. Abolishes the two-year ownership condition – currently under the 1993 Act leaseholders have to wait until they have been the registered owners of the property for two years before they have a legal right to extend their lease. This condition has been removed by the new Bill.
5. Abolishes leasehold houses – this now appears in the final version of the new Bill although there are “exceptions to the rule” such as on retirement complexes.
6. Changes the recoverable cost position of the 1993 Act – under the 1993 Act leaseholders are required to pay the reasonable recoverable legal and valuation costs of the freeholders. The new Bill makes it so that in the majority of circumstances leaseholders and freeholders will meet their own costs – although this is unlikely to apply to claims where the lease extension price is below a certain sum (again this level has not been confirmed/prescribed by the Government as yet),
7. Option to buy out ground rent without extending the lease term – the new Bill allows those leaseholders who already have long leases simply to buy out their Ground Rent only (without also having to pay to extend their lease) if they have over 150 years remaining.

It should be noted that plans to remove ground rent for existing leaseholders or cap it at £250 appear to have been dropped.

Also until the Leasehold and Freehold Reform Bill 2024 has been enacted or parts have commencement dates none of the above is currently legally possible/legally in effect. We therefore cannot advise on or start any applications under the new Bill.

Should I extend my lease now?

Currently our advice still remains that if you have a lease with approaching or under 80 years remaining time is likely to still be of the essence and we would recommend you consider extending your lease as soon as possible under the 1993 Act. Those with 85 years or more may also still want to consider extending their lease in the short term depending on their plans for the property although waiting for the enactment of the new legislation is likely to be the best course of action currently.

How Can We Help?

If you have any queries on any of the above please contact Guy Osborn or Amber Krishnan-Bird.

• Fill in our online enquiry form; or
• Call us on 020 7485 8811