The Leasehold and Freehold Reform Act New Law

The Leasehold and Freehold Reform Act, which has officially become law, promises significant changes and protections for homeowners. This new legislation aims to make homeownership more affordable and transparent, especially for leaseholders.

Key Changes in the Act

Easier and Cheaper Freehold Purchases: Leaseholders will find it simpler and less expensive to buy their freehold. The Act also increases the standard lease extension term to 990 years for both houses and flats, up from the previous 50 and 90 years, respectively.

Transparency and Accountability: The Act mandates greater transparency in service charges. Freeholders and managing agents must now issue bills in a standardised format, making it easier for leaseholders to scrutinise and challenge them. Additionally, excessive building insurance commissions are banned and replaced by transparent handling fees.

Empowered Leaseholders: Leaseholders can now challenge unreasonable charges at Tribunal without the deterrent of paying their freeholder’s legal costs. They can also take over the management of their property more efficiently, even in buildings where up to 50% of the floor space is commercial.

Ban on New Leasehold Houses: The sale of new leasehold houses is banned except in exceptional circumstances. This ensures that every new house in England and Wales will be freehold from the outset.

Rights for Freehold Homeowners: Freehold homeowners on private and mixed tenure estates now have the same rights of redress as leaseholders, including greater transparency over estate charges.

Implementation and Future Steps

The Act has received Royal Assent but is not yet in effect. Only minor amendments to the Building Safety Act will come into force on 24 July 2024. The next government will decide the timeline for implementing the rest of the Act, likely over the coming months and years.

Expert Advice for Leaseholders

Leaseholders considering extending their lease or purchasing their freehold should carefully evaluate their situation. Those with leases below 80 years or high ground rents might benefit more from waiting until the Act's provisions are fully implemented. However, those with longer leases or low ground rents may find the current terms more favourable. Consulting a leasehold specialist for tailored advice is recommended.

The Leasehold and Freehold Reform Act represents a significant step towards fairer homeownership. The Act addresses long-standing issues in the property market by making it easier and cheaper for leaseholders to gain more control over their homes and by banning the sale of new leasehold houses. Homeowners can look forward to more rights and greater transparency once the Act is in effect.

 

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