24th January 2025 | Ashley Nkemakolam | leasehold, freehold, residential real estate
Ashley Nkemakolam, a trainee solicitor in our Residential Real Estate team, Secondment from Rayden Solicitors, delves into the key updates introduced by the LFRA 2024 and Leasehold and Commonhold Reform Bill.
As part of The Sherrards Training Academy, we have asked our Legal Assistants and Trainee Solicitors to write articles to support their learning, and also to ensure they start to build on their own personal brand. This article has been fact-checked and proofread by Head of the Residential Real Estate department, Caroline Vernon.
The UK government is set to implement significant reforms to leasehold and freehold laws in 2025, as part of a wider effort to address long-standing concerns regarding the rights of leaseholders and freeholders alike. These reforms will offer enhanced protections for residential leaseholders, improve transparency, and modernise the commonhold system. The measures are outlined in the Leasehold and Freehold Reform Act 2024 (LFRA 2024) and the upcoming Leasehold and Commonhold Reform Bill.
What are the key changes?
- Leasehold and Freehold Reform Act 2024 (LFRA 2024)
The LFRA 2024, set to take effect in the first half of 2025, introduces a series of important changes aimed at improving the rights of residential long leaseholders. Among the key provisions are:
- Banning Long Residential Leases of Houses (With Exceptions): The Act prohibits the granting of long residential leases (21 years or more) of houses unless certain exceptions apply. These exceptions include leases granted from a leasehold estate where the superior lease was set up before 22 December 2017 or pursuant to an agreement for lease entered into prior to 22 December 20217, as well as retirement and shared ownership leases.
- Amending Leasehold Enfranchisement and Lease Extensions: Leaseholders will no longer be required to wait two years before claiming the right to extend their lease or buy the freehold of their property. Additionally, restrictions preventing tenants from making a second claim within 12 months of a failed claim will be removed. Furthermore, tenants of houses and flats will be able to claim lease extensions without the previous 50-year limitation from the term date of their existing lease.
- Increased Rights for Leaseholders and Freeholders: The Act expands the rights of leaseholders, particularly in relation to service charges, insurance, administration fees, and the provision of sales information. Importantly, it also introduces regulation for estate management charges, offering freeholders protections akin to those enjoyed by residential leaseholders.
- Mandatory Redress Scheme for Landlords: Landlords and estate management companies will be required to register with a mandatory redress scheme, ensuring greater accountability and fairness.
- New Regulations for Rent Charges: The Act includes provisions to regulate demands for, and remedies to address, non-payment of historic rentcharges, offering further protection to tenants.
- The Leasehold and Commonhold Reform Bill (2025)
In the second half of 2025, the government will introduce a draft Leasehold and Commonhold Reform Bill. This bill aims to modernise the commonhold system and make it the default tenure for new homes. For years, commonhold has been seen as an alternative to leasehold ownership, but it has not been widely adopted. There ae only 184 properties registered as commonhold in England and Wales. The new bill seeks to address barriers to commonhold and simplify its implementation, benefiting future generations of homeowners.
- Right to Manage Reforms (Spring 2025)
Another notable change will be the introduction of measures to reform the cost rules and voting rights for leaseholders seeking to exercise their right to manage. Leaseholders in mixed-use buildings will find it easier to take over management responsibilities from their freeholders, as the requirement for them to pay the freeholder’s costs will be eliminated in most cases. The reforms will also include provisions to reduce costs and simplify the process of exercising the right to manage, which could significantly increase the number of leaseholders able to take control of their buildings’ management.
- Protection Against Unscrupulous Managing Agents
The government is committed to enhancing protections for leaseholders against unscrupulous managing agents by introducing stronger regulations. This will include a mandatory professional qualification for managing agents, as well as a new basic standard for their conduct. A public consultation on these measures will take place later this year, which could lead to more stringent requirements for those responsible for managing residential properties.
- Simplifying Service Charge Disputes and Valuation Rates
Further consultations will take place this year to streamline processes related to service charge disputes, particularly in relation to unreasonable costs. Leaseholders will also benefit from simplified methods for challenging excessive service charges and a clearer approach to setting valuation rates used in the calculation of enfranchisement premiums. New consumer protection provisions will enhance transparency and provide leaseholders with the right to challenge excessive charges at the First Tier Tribunal.
What This Means for Leaseholders and Freeholders
The leasehold reforms planned for 2025 mark a significant shift in the landscape of property ownership in the UK. Leaseholders will see increased rights and easier pathways to enfranchisement and lease extensions, which will ultimately give them more control over their properties. The measures around the right to manage and estate management regulation will help to address some of the most common frustrations of leaseholders, particularly in relation to poor property management and excessive charges.
For freeholders, the new regulations around estate management charges and the introduction of a mandatory redress scheme mean that greater oversight and accountability will be required. The shift towards commonhold could also impact freeholders in the long term, as the government aims to make this tenure the default for new homes.
As the government moves forward with consultations and the introduction of new bills, leaseholders and freeholders alike will need to stay informed to fully understand how these changes will affect them.
If you have questions or concerns about how the reforms might impact you, our team of residential real estate, conveyancing and tenants specialists is available to provide advice and support tailored to your circumstances – Contact us here.