UK Government to Implement Major Leasehold and Freehold Reforms in 2025

The UK government is set to introduce significant reforms to leasehold and freehold laws, aiming to enhance property owners' rights and modernise outdated systems. These changes, outlined in the Leasehold and Freehold Reform Act 2024 (LFRA 2024) and the forthcoming Leasehold and Commonhold Reform Bill, seek to address long-standing concerns over property management, lease extensions, and servicechargesorted.co.uk/blogs/digital-solution-can-improve-the-whole-process-by-making-it-faster-and-more-transparent'>service charges.

The Leasehold and Commonhold Reform Act (LFRA 2024) will take effect in the first half of 2025. It introduces pivotal changes designed to improve protections for residential long leaseholders and simplify property ownership processes. One major reform is the prohibition of long residential leases for houses, defined as leases lasting 21 years or more. Exceptions include leases granted before 22 December 2017 or under prior agreements, as well as retirement and shared ownership leases.

The Act also streamlines leasehold enfranchisement by removing the two-year waiting period for leaseholders wishing to extend their lease or purchase the freehold. Restrictions preventing a second claim within 12 months of a failed attempt will be abolished. Leaseholders of both houses and flats can now claim lease extensions without facing the previous 50-year limitation.

Another cornerstone of the Leasehold and Commonhold Reform Act is increased protection for both leaseholders and freeholders. The Act introduces expanded rights concerning servicechargesorted.co.uk/blogs/digital-solution-can-improve-the-whole-process-by-making-it-faster-and-more-transparent'>service charges, insurance, administration fees, and sales information. Freeholders will benefit from regulations similar to those offered to leaseholders, particularly regarding estate management charges. Landlords and estate management companies must register with a mandatory redress scheme to improve accountability. Further provisions address historic rent charges, offering tenants remedies for non-payment demands.

Upcoming Leasehold and Commonhold Reform Bill

The government plans to introduce the Leasehold and Commonhold Reform Bill in the latter half of 2025. The primary objective is to make commonhold the default tenure for new homes. Despite being proposed as an alternative to leasehold, commonhold has struggled to gain traction, with only 184 properties registered in England and Wales. The bill aims to remove barriers and simplify implementation, encouraging broader adoption.

Right to Manage Reforms

Right to manage or (RTM) Reforms scheduled for spring 2025 will make it easier for leaseholders to exercise their property management rights. Changes include eliminating the requirement that leaseholders cover freeholders' costs in most cases. New provisions will reduce expenses, removing the requirement for leaseholders to cover the legal fees of their freeholder when making a Right to Manage claim and simplify the process, potentially increasing the number of leaseholders taking control of property management.

Strengthening Protections against Unscrupulous Managing Agents

The government is dedicated to enhancing regulations for managing agents. A mandatory professional qualification will be established alongside a new code of conduct. These measures aim to guarantee higher standards in property management. Public consultations on these proposals will occur later this year.

Simplifying Disputes and Valuations

Further consultations will explore streamlining servicechargesorted.co.uk/blogs/digital-solution-can-improve-the-whole-process-by-making-it-faster-and-more-transparent'>service charge dispute processes. Leaseholders will benefit from more straightforward methods for challenging excessive charges. New valuation rate guidelines for enfranchisement premiums will also be established. Enhanced consumer protections will promote transparency and allow leaseholders to challenge unreasonable fees at the First Tier planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal

Implications for Leaseholders and Freeholders

The reforms in the Leasehold and Commonhold Reform Act represent a significant shift in the UK property ownership landscape. Leaseholders will gain improved rights and easier pathways to enfranchisement and lease extensions, granting them greater control over their properties. Measures to simplify the right to manage and regulate estate practices address common frustrations, particularly concerning poor management and excessive costs.

Freeholders will face increased oversight, particularly with the introduction of mandatory redress schemes and regulations governing estate management charges. The push towards commonhold as the default tenure could also reshape property ownership in the long term. As consultations progress and new legislation is introduced, both leaseholders and freeholders are encouraged to stay informed about these developments and their potential impact on property rights and management.