The Leasehold and Freehold Reform Act 2024 (LAFRA 2024) was passed last summer to make a number of reforms, but most of these are still to be implemented.
The Minister of State for Housing and Planning provided an update in November 2024 regarding leasehold reforms. This note focuses on the leasehold enfranchisement reforms.
Abolition of 2 year ownership rule in January 2025
The Minister said the removal of the 2 year ownership rule will be introduced in January 2025.
Currently, a lessee must have owned the flat for at least 2 years to qualify for a statutory lease extension. The 2 year rule also applies to lessees of houses for statutory freehold acquisitions or statutory lease extensions of houses.
So, if a buyer would like the lease to be extended (or, for a house, would like to buy the freehold) once the property has been purchased, the buyer must wait at least 2 years before being entitled to a statutory lease extension (or house freehold acquisition). To avoid the 2 year wait, the seller would have to begin the lease extension claim (or house freehold acquisition claim) and then assign the claim to the buyer on completion of the sale of the property. The removal of the 2 year rule will mean the buyer will no longer have to wait to qualify for the statutory lease extension/house freehold acquisition and in many cases the seller will no longer have to begin the statutory lease extension claim/house freehold acquisition claim.
If the existing lease is too short for lending purposes, the lease will still usually have to be extended on or before completion of the purchase of the flat in order to obtain a mortgage. In these cases, a voluntary lease extension is normally obtained (if the landlord will agree to this) since the timeframe for the statutory lease extension process is often too long.
A firm date for removing the 2 year rule is awaited.
Right to manage changes – Spring 2025
The Minister also said the LAFRA 2024 reforms concerning right to manage provisions (expanding eligibility, reforming responsibility for costs and reforming voting rights) will be introduced in spring 2025.
In relation to costs, lessees will no longer have to pay the landlord’s costs for the right to manage claim if the claim is successful.
Again, a firm date for introducing these changes is awaited.
Other leasehold enfranchisement changes
This summer, 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.
The Government wishes to reinvigorate commonhold and make further changes to the leasehold system. It plans to publish a White Paper on the commonhold reforms early this year and publish a new Draft Leasehold and Commonhold Reform Bill in the second half of this year.
Stay tuned for news of further developments.
If you have any queries please do not hesitate to email me or contact the team on 020 8858 6971.