UKRE Key Legislation Update: The Leasehold and Freehold Reform Act 2024

To ensure that our technical expertise is always current for our clients and for our intermediaries, our UKRE team at Ferbrache & Farrell LLP led by Anna Douglass commissions specialist one to one training.

As part of that professional development, we collaborate and share with other property experts where we believe the legislative landscape may be shaped.

We have active discussions about how, in consequence, we can best assist our clients.

One such significant new Act is the Leasehold and Freehold Reform Act 2024 (the Act) which recently concluded the usual Parliamentary debate machinations through the House of Commons and through the House of Lords.

Although Royal Assent was granted on 24 May 2024, it will require the new, post-election Government to take the necessary steps for the Act to commence, if indeed they do.

In that sense, we are still (to a certain extent) in abeyance, but in the words of Baden-Powell it is best to be prepared.

The origins of the Act date back to 2017, with a Conservative manifesto pledge to ‘crack down on unfair practices in leasehold’, as well as a White Paper of the same year and a later series of recommendations from the Law Commission in 2020.

Wide ranging and seismic, the Act essentially improves the relative position of leaseholders and readjusts the position of freeholders.

Time will be the judge of whether this legislation becomes as significant as the groundbreaking property statutes of 1925, 1972, 1996 and latterly 2002, but for the time being it is potentially very relevant.

We are already engaging in close dialogue with our clients about the various proactive steps we recommend they might take to ensure their best interests are protected.

The Preamble to the Act is very informative, and we have numerated the various provisions it covers:

“An Act to: 

1. prohibit the grant or assignment of certain new long residential leases of houses;
2. to amend the rights of tenants under long residential leases to acquire the freeholds of their houses;
3. to extend the leases of their houses or flats;
4. to collectively enfranchise or manage the buildings containing their flats;
5. to give such tenants the right to reduce the rent payable under their leases to a peppercorn;
6. to regulate the relationship between residential landlords and tenants;
7. to regulate residential estate management;
8. to regulate rent charges; and
9. to amend the Building Safety Act 2022 in connection with the remediation of building defects and the insolvency of persons who have repairing obligations relating to certain kinds of buildings.”

There is a great deal of material to advise effectively on, not least given that the Act is 221 pages in length, though with the caveat of course that secondary legislation will still be needed.

For our readers keen to investigate further, a copy of the Act can be found here.

Some key points are that:

1. An obligation to grant an extended lease for 50 years under the Leasehold Reform Act 1967 has been changed to an obligation to grant such an extension for 990 years (avoiding multiple extension requests);
2. An obligation to grant a new lease for 90 years under the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) has also been changed to an obligation to grant such a lease for 990 years (for the reason above);
3. The rents for such leases will be only a notional ‘peppercorn’;
4. The two year period for a qualifying tenant to acquire a new lease under the 1993 Act has been removed, meaning a leaseholder does not need to wait to take such steps; and
5. For leases of less than 80 years, the so called ‘marriage’ or ‘hope’ value will be abolished signifying that the premium ordinarily payable for extending a lease will disappear.

For many of our clients, such considerations will be very important in determining their strategic direction for asset management and holdings.

We are committed to providing timely and effective advice on such matters, and we greatly look forward to helping however and whenever we can.

If you need any further information or legal advice, including conveyancing of a property in England, please contact our designated UKRE team led by Anna Douglass, who will be delighted to assist.