What You Need to Know About Leasehold Reform for 2024
Slowly but surely, leasehold reform is coming to England and Wales – or, at least, that is the intention behind the Leasehold and Freehold Reform Bill 2023-2024.
The Bill had its second reading in Parliament in December 2023 and a consultation was recently concluded on the challenging issue of how to deal with ground rent for existing leases. Does this mean the Bill might become law in 2024? Possibly, although there is no guarantee, especially with a general election expected this year. That said, for anyone who owns or manages leasehold property, it is sensible to make sure you understand what changes might be coming.
In this article, we cover the proposed changes contained in the Bill, some important related government proposals, when the changes might come into effect and what landlords, property managers, investors and homeowners will need to do if and when the law changes.
Need help with a freehold or leasehold property issue? Please contact John Wagstaffe who will be happy to advise.
Key points to know about leasehold reform in 2024
Key provisions of the Leasehold and Freehold Reform Bill include:
- Making it less costly and more straightforward to extend the lease or buy the freehold on leasehold property
- Increasing the standard term of a lease extension up to 990 years
- Reducing any ground rent to a nominal ‘peppercorn’ rate when a lease is extended (in exchange for payment of a premium)
- Empowering more leaseholders to extend their leases, buy their freeholds and take over management of their buildings by changing the qualifying criteria they must meet
- Making service charges more transparent and giving leaseholders the right to regularly receive key information about these charges and to request information about the charges and their building’s management
The government also plans to:
- Improve commonhold rules to make this a more attractive option
- Require property managing agents to be regulated
- Set up a Redress Reform Working Group involving ombudsmen and redress schemes to help drive reform
When might the Leasehold and Freehold Reform Bill become law?
Unfortunately, there is no clear answer to this question. How long it takes a bill to become law varies significantly, depending on factors such as how urgent the government feels the matter is and how much Parliamentary time can be made to deal with it.
It is possible that the Leasehold and Freehold Reform Bill will pass into law this year, but there is no guarantee of that. While the Bill has had its second reading, it has now entered the committee stage, which is normally the longest part of the process.
A key point to bear in mind is that Bills cannot be carried over from one parliament to the next. With a general election expected in 2024, this means that the Bill would need to be passed and achieve Royal Assent before the election or the process would need to restart with the new parliament.
This may make it more likely that the Bill, or at least those parts that can secure parliamentary approval, will pass into law in 2024 since the clock is ticking. However, even if that is the case, the date on which the new rules come into force would not necessarily need to be this year.
What will leasehold owners and managers need to do about these changes?
If the proposed changes become law, then it is likely there will be a significant increase in leaseholders applying for lease extensions, seeking to buy the freehold on their properties and looking to take over management of their buildings. Leaseholders may also take a keener interest in their service charges and building management if they are empowered to receive more information about this from landlords and managing agents.
Landlords and managing agents will need to be aware of leaseholders’ new entitlements and make sure that they comply with the terms of the new legislation.
Expert advice should be sought to ensure all legal requirements are met and may also be beneficial for landlords and managing agents when dealing with requests for information about service charges and property management.
How Longmores can help with leasehold issues
Any changes to leasehold law could have a very significant impact for those who own and manage affected properties. Understanding the changes and what they mean for your property can help you to make the right decisions when the need arises.
At Longmores, our Property Litigation team are very experienced in dealing with all legal matters related to leasehold property. We will be happy to advise landlords, property managers, investors and homeowners on the impact of the proposed changes contained in the Leasehold and Freehold Reform Bill when it becomes law. Where disputes arise, we can also ably guide you through these challenges.
To discuss how we can help with freehold and leasehold property issues, please contact John Wagstaffe who will be happy to advise.
Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.
