The Leasehold and Freehold Reform Act 2024 was pushed into law by the outgoing conservative government just a week before the general election in June this year. The new act had been expected in 2021 but was deliberated over for what many leaseholders believe was far too long. The timing of the bills enactment also appears a little suspicious and I have spoken with several people “in the know” who believe that the Conservatives introduced the Bill prior to the election and the dissolution of parliament after being lobbied by major property investment firms and large-scale landlords that feared a Labour government would make more radical changes to the law in favour flat owners. This could have had a huge impact on the value of these companies so they would clearly have concerns.
Despite its introduction in June the Leasehold and Freehold Reform Act 2024 will have little impact on the current state of play for the 5 million people who own a flat in the UK. “Why?” you ask, well the Act is dependent on secondary legislation which has yet to be drafted. The new Labour government will no doubt be keen to push forward with its introduction, but it is estimated that we will not see this new legislation enacted until late 2025 (if not 2026)!
So if you have been holding off on extending your lease in the hope that the Leasehold and Freehold Reform Act 2024 will reduce the premium that you have to pay your Freeholder then you are going to have to wait a bit longer. Although the Act removes “marriage value” from the calculation which reduces the costs for leaseholders the formula for the new calculation is going to be set out in the secondary legislation. So even the free online lease extension calculators like the one on the government leasehold advisory website cannot tell you what you are going to have to pay for a lease extension under the new act.
Despite what I have said the Leasehold and Freehold Reform Act 2024 could potentially be a significant piece of legislation which could positively affect the lives of up to 5 million people across UK. So, how will the Act benefit the average flat owner?
Lease Extensions: As mentioned above the Act extends the standard lease term for lease extensions from 90 years to 990 years. This affectively brings Leasehold ownership in line with Freehold which is good news.
Houses can no longer be sold as Leasehold Tenure. Again good news especially considering the recent housing ground rent scandals.
Extending your lease : The Act removes the “marriage value” from the cost calculations (remember that a lot depends on the secondary legislation.
Estate Management Charges: New protections allowing leaseholders to challenge unreasonable charges have been introduced which give transparency and justification to fees charged to Lessees.
Service Charges and Administration Charges: Rules dictating more detailed and transparent service charge demands are to be introduced. Together with a requirement for the publication of administration charge.
Insurance Commissions: The Act prohibits landlords and managing agents from earning commissions on insurance. This should certainly reduce the costs for leaseholders.
Ground Rent: The Act changes how ground rent arrears can be enforced, protecting homeowners from harsh enforcement actions like possession.
So there is lot for the UK flat owner to feel positive about in the future and we can only hope that the secondary legislation provides the right ammunition for the Leasehold and Freehold Reform Act 2024 to provide the much needed reform to home ownership in our country.
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