Update by Tyrone Grant, Head of Leasehold Enfranchisement
The Leasehold and Freehold Reform Act 2024 (LAFRA 2024) was passed on 24 May 2024 to make changes to leasehold law. This note focuses on the leasehold enfranchisement reforms.
Reforms
The reforms in LAFRA 2024 include:
- extending the lease term by 990 years;
- removing the requirement for the lessee to pay towards some of the landlord’s costs regarding the lease extension or purchase of the freehold except in limited circumstances;
- removing the requirement for the lessee to pay the landlord’s costs regarding right to manage claims except in limited circumstances;
- removing marriage value from the calculation of the premium (price) for a lease extension or freehold purchase;
- prescribing rates for calculation of the premium and introducing an online calculator;
- removing the 2 year minimum ownership period for a lessee to qualify for a statutory lease extension or to claim the freehold of a house;
- giving lessees of qualifying leases the right to reduce the ground rent to a peppercorn (zero in practice) in return for paying a premium;
- changing the qualification criteria for buildings in relation to acquiring the freehold, so that maximum non-residential floor area for a building to qualify is 50% of the building (instead of 25%); and
- changing the qualification criteria for buildings in relation to right to manage claims, so that maximum non-residential floor area for a building to qualify is 50% of the building (instead of 25%).
Further proposed reforms
Further reforms are also planned, being:
- enacting remaining Law Commission recommendations to bolster lessees’ rights to extend their leases, buy the freehold and take over the building management functions;
- reinvigorating commonhold and restricting the sale of new leasehold flats – the Government is to consult on the best way to achieve this;
- regulating ground rents for existing lessees; and
- ending forfeiture of leases.
Abolition of 2 year minimum ownership rule in force from 31 January 2025
In relation to removing the 2 year minimum ownership period for a lessee to qualify for a statutory lease extension or to claim the freehold of a house, this reform came into force on 31 January 2025.
Right to manage changes in force from 3 March 2025
The reforms concerning right to manage provisions (expanding eligibility, reforming responsibility for costs and reforming voting rights) were introduced on 3 March 2025.
The reforms provide that:
- lessees no longer have to pay the landlord’s costs in relation to a right to manage claim so long as the claim is successful;
- for a building to qualify for right to manage, the limit for the non-residential part is increased from 25% to 50% of the internal floor area of the building; and
- the calculation of the block of votes for a landlord who becomes a member of the right to manage company is changed so that the landlord does not have a disproportionately high number of votes.
Many other changes not yet in force and timeframe
Although LAFRA 2024 has been passed, most of the reforms relating to leasehold enfranchisement (including the valuation changes) have not come into force and they will need secondary legislation to bring them in.
In summer 2025 the Government is to consult on the valuation rates used to calculate the cost of lease extension and freehold premiums. Further legislation would then be needed to implement the changes. The timeframe for introducing the valuation changes is therefore unclear.
In relation to commonhold reforms, a White Paper was published in March 2025 and a new Draft Leasehold and Commonhold Reform Bill is to be published in the second half of 2025.
More details of the further reforms and the timeframe for introducing these are awaited.
Therefore, it remains to be seen when the changes will come into force and what they will look like finally.
“Old” law in still in force in the meantime
Until the other reforms in LAFRA 2024 and any further new laws come into force, the existing law will continue to apply.
Under the existing law, the following applies:
- for lease extensions of flats the lease term is extended by 90 years;
- the lessee must pay towards some of the landlord’s costs regarding the lease extension or purchase of the freehold;
- a premium (price) is payable to the landlord for the lease extension or freehold purchase and marriage value is included in the calculation of the premium where the unexpired term of the relevant lease is 80 years or less; and
- for buildings to qualify for the freehold to be acquired, the maximum non-residential floor area is 25% of the building.
Voluntary lease extensions and freehold acquisitions
In some cases, it is possible to extend the term of the lease or purchase the freehold by negotiation with the landlord. This is outside the statutory framework, so the landlord is not obliged to engage in negotiations.
We are happy to assist with leasehold enfranchisement matters. If you have any queries, please do not hesitate to email me or contact me on 020 8305 3522.