The Freehold and Leasehold Reform Act 2024 – Now what happens?

In short, property owners have been left in limbo. Not all property owners but specifically leaseholders seeking lease extensions and those who own freehold houses and are compelled to pay an estate charge.

Whilst the Freehold and Leasehold Reform Act 2024 gained Royal Ascent on 24^th May as part of the Conservatives “wash up”, little of the legislation is active as it requires secondary legislation to bring the various provisions of the act into force.

Some limited parts of the act, including provisions relating to building safety, came into effect on 24 July 2024, however, the incoming Labour Government pledged to go further in the Kings Speech specifically;

• enact remaining Law Commission recommendations to strengthen leaseholders’ rights to extend their lease, buy their freehold, and take over management of their building.
• reinvigorate the commonhold tenure by modernising the legal framework. Commonhold was introduced in 2002 as a way of enabling the freehold ownership of flats and avoiding the shortcomings of leasehold ownership.
• regulate ground rents for existing leaseholders.
• strengthen the rights of freehold homeowners on private or mixed-tenure residential estates. The government will consult on the best way to achieve this.
• remove the draconian threat of forfeiture as a means of ensuring compliance with a lease agreement.

The potential timescales for reform are troubling to those leaseholders with lease terms that will trigger “marriage value” during this parliamentary term. The conundrum is whether to extend now and avoid marriage value or wait to see if the reforms result in cheaper lase extensions.

Opinion

In my opinion, the Labour Government has a greater chance of providing a better outcome for leaseholders than the outgoing conservative Government. Michael Gove’s original proposals ended up being vastly watered down presumably following lobbying from freehold investors.

If you do wish to pursue a lease extension, I would certainly advocate hard bargaining with your freeholder if you pursue this action before legislation is passed.

Otherwise, if you have 82 years or more left on your lease, it may be worth waiting a little longer (but monitoring the situation).