As mentioned in the King’s Speech this year, the legislation regarding leaseholds remains in a state of imminent change. While some aspects of the Leasehold and Freehold Reform Act 2024 have already been implemented, such as amendments to the Building Safety Act 2022 effective from July 24, 2024, the majority of the reforms are not yet in force and may take several months to be enacted.

So what impacts will this new legislation have?

• Leaseholders will gain the ability to serve notice, as they would to extend their lease, but instead they will be able to ‘pay off’ their ground rent with a lump sum. Additionally, landlords will no longer be able to forfeit a lease where the ground rent exceeds £350 per annum, a change that addresses existing challenges for lenders and indemnity insurers.
• The legislation will prohibit the granting and assignment of new long residential leases for houses (as opposed to flats or apartments). Exceptions will be made for specific types of leases, such as those for retirement developments and National Trust properties.
• The marketing of leasehold houses will not be permitted and Trading Standards will again be there to enforce this against any agents who fall foul of these provisions.

So how will positive covenants (such as where there is shared amenity land or a private road to maintain) be enforced when this comes in? It has long been a practical issue to ensure enforceability of freehold covenants and the legal sector will need to become well-versed in the commonhold regime, first introduced in 2002 but rarely adopted.

Managing agents and Landlords will feel the impact of more tenant-friendly provisions regarding service charges and insurance rents, with an emphasis on transparency and limitations on insurance commissions, which historically have been a source of litigation.

In terms of lease extensions, the new term of any extended lease will be fixed at 990 years to prevent the need for repeat extensions. Marriage value will be removed from the valuation process, and tenants will not need to have owned the property for two years. Additionally, the new legislation will also limit costs’ recovery by the landlords.

It’s important that any leaseholders who are considering extending their leases seek specific legal advice to determine whether to proceed now or wait (what could be quite a long time) for the legislation to come into effect. For more detailed advice or assistance, please contact our team, lead by our Head of Real Estate Sarah Sandy, to discuss how these changes might affect your property transactions and leasehold arrangements.