Leasehold Reform Act 2024: What You Need to Know
The Leasehold Reform Act 2024 has officially received Royal Assent, following a period of debate and agreement between the government and opposition parties. This significant piece of legislation aims to address many of the challenges faced by leaseholders in the UK, bringing in a range of reforms designed to create a fairer and more transparent system. Since we now have a Labour government, they will decide whether and when to implement the remaining provisions of the Act, which is likely to take place in stages over the course of the next several months and years. Until then, the current laws on leasehold remain
In this article we will explore the key changes introduced by the Act, its implications for leaseholders and freeholders, as well as the potential impacts on the property market. For more information on the background of the leasehold reform, please see our blog here.
Key Changes Introduced by the Leasehold Reform Act 2024
The Leasehold Reform Act 2024 introduces several significant changes aimed at protecting leaseholders. The key highlights include:
1. Lease Extensions:
- Leaseholders can now extend their leases by 990 years at zero ground rent.
- This applies to both houses and flats, eliminating the need for multiple lease extensions over a property’s lifetime.
2. Removal of Marriage Value:
- This potentially reduces the cost of lease extensions for many leaseholders.
3. Standardised Format for Service Charges:
- Ensuring freeholders or managing agents use bills in a standardised format.
- Aims to make the process more transparent, predictable and easier to scrutinise.
4. Right to Manage (RTM) Changes:
- Expansion of RTM rights to cover multiple buildings on an estate.
- Simplification of the RTM process, making it easier for leaseholders to take control of their buildings with the threshold for commercial space in the building raised to 50% from 25%.
5. Prohibition of New Leasehold Houses:
- Ban on the creation of new leasehold houses, except in specific circumstances.
- Existing leasehold house owners are given the right to extend their lease or buy the freehold more easily.
6. Ground Rent Restrictions:
- Capping of ground rents in lease extension calculations, although in some cases this might not apply.
7. Removal of Ownership Requirements:
- Leaseholders no longer need to have owned the property for at least two years to qualify for a lease extension or freehold purchase.
8. Cost Reforms:
- In most cases, leaseholders will no longer bear the freeholder’s costs when making a claim in enfranchisement cases. Each party will cover their own costs.
FAQs
Q: What is the Leasehold Reform Act 2024?
A: The Leasehold Reform Act 2024 is a significant piece of legislation aimed at reforming the leasehold system in the UK. It introduces various changes to make leasehold ownership fairer and more transparent for leaseholders.
Q: How does the removal of marriage value benefit leaseholders?
A: The removal of marriage value reduces the cost associated with lease extensions and enfranchisement, making it more affordable for leaseholders to extend their leases or purchase the freehold.
Q: What are the new rights to manage (RTM) changes?
A: The Act expands RTM rights to cover multiple buildings on an estate and simplifies the process, making it easier for leaseholders to take control of their buildings.
Q: What impact will the prohibition of new leasehold houses have on property developers?
A: Property developers will need to adapt their strategies, exploring alternative models like commonhold to comply with the new restrictions on creating leasehold houses.
Q: How will ground rent restrictions affect leaseholders and freeholders?
A: Ground rent restrictions will cap the amounts leaseholders pay, providing financial relief. Freeholders will see a reduction in income from ground rents, necessitating adjustments to their business models.
Additional Insights from RICS
The Royal Institution of Chartered Surveyors (RICS) has welcomed the Leasehold Reform Act 2024, highlighting its potential to bring much-needed clarity and fairness to the market. The government aims to transition towards commonhold, reducing reliance on leasehold arrangements.
This shift will require significant adjustments from surveyors, valuers, and legal professionals to adapt to new ownership structures and valuation techniques. Continued education and professional development will be critical in navigating these changes effectively. For more detailed insights, visit the RICS article on leasehold reform
Moving Forward
At Novello Chartered Surveyors, our team of RICS Chartered Surveyors is ready to support you in adapting to these reforms. The Leasehold Reform Act 2024 is a step towards a fairer property market, and with professional guidance, stakeholders can navigate the new landscape successfully.
For expert advice and support, contact Novello Chartered Surveyors today. Our team is here to help you understand and benefit from the latest legislative changes in the leasehold sector.
