'Serious flaws' delay leasehold legislation
Housing Minister, Matthew Pennycook MP, has acknowledged there are 'serious flaws' in leasehold reform legislation, delaying pledges made to modernise the system. Eleanor Bateman, Senior Public Affairs Officer, looks at what has been announced so far, and what happens next.
Passed earlier this year by the previous government, the Leasehold and Freehold Reform Act 2024 (LFRA) introduced significant changes to enfranchisement and the right to manage, aiming to deliver some immediate relief for leaseholders.
The Act also contains provisions designed to make it easier and cheaper for leaseholders to extend their lease, by removing a leaseholder’s obligation to pay ‘marriage value’ – the increase in property value generated through lease extension – and increasing the standard lease extension to 990 years.
However, the legislation has been criticised for its failure to comprehensively overhaul the leasehold system. The Government’s lack of progress to implement key parts of the Act has also drawn criticism, as just a few technical areas are currently in force. This is despite a commitment to “act quickly” to implement the reforms.
Amendment and consultation
Last week, the Government confirmed that, while it remains committed to leasehold reform, the Act will need to be amended via primary legislation before it can be implemented in full.
In a statement to the House of Commons, Housing Minister, Matthew Pennycook MP, acknowledged “serious flaws” in the legislation, including the exclusion of shared ownership leaseholders from the new 990-year lease extension provisions, which will delay commencement.
This will be frustrating for leaseholders, particularly those with short leases wanting to extend.
Also disappointing for leaseholders is the admission that the Government’s “first steps” towards making commonhold the default tenure for flats will be taken later than expected, now promised only “by the end of the parliament” in 2029.
The minister explained that “an extensive programme of detailed secondary legislation” is needed, which will involve further consultation.
As well as consultation on elements of the Act – such as the rates to be used in lease extension calculations – the Government has confirmed it will also consult on commonhold via a White Paper to be published early next year, including ‘fleecehold’; the regulation of property agents and broader leasehold reforms. At present it isn't clear whether these will be individual consultations.
Another leasehold reform Bill
The Government does not think that the Leasehold and Freehold Reform Act goes far enough to end what it considers to be the “feudal” practice of leasehold.
To do this, it intends to introduce an “ambitious” Draft Leasehold and Commonhold Reform Bill (LCRB) next year.
This Bill is likely to incorporate proposals that were omitted from the Leasehold and Freehold Reform Act.
These include a ban on new leasehold flats alongside a framework for commonhold, the Government’s preferred tenure for new flats, as well as an end to forfeiture. The draft Bill is expected in the latter half of 2025, with implementation unlikely until 2026 at the earliest.
Leasehold reform timeframe
Leasehold reform is a complex area of law, and while leaseholders are understandably eager to see progress, it is encouraging that the Government is taking the time to consult widely on the issues.
The update last week has provided the clearest insight yet on the Government’s plans and demonstrates a determined shift towards reforming the leasehold system.
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From January 2025, the ‘two-year rule’ will be removed, meaning leaseholders will no longer need to wait two years after purchasing a property before exercising their right to extend their lease or buy their freehold.
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By spring 2025, leaseholders in mixed-use buildings (where up to 50% of floorspace is non-residential) will gain access to right-to-manage provisions. Voting rights for these companies will also be reformed to ensure leaseholder control.
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In summer 2025, the Government will consult on valuation rates used in lease extension calculations.
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A draft Leasehold and Commonhold Reform Bill will be published in the second half of 2025 and will be subject to “broad consultation”.
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Further consultations on commonhold, consumer protections for homeowners who pay estate and management charges, ‘fleecehold’ and the regulation of property agents are expected in 2025, though no firm dates have been announced.
We will continue to monitor developments and push for reform that is balanced and fair. If you have views on leasehold reform, we would like to hear from you. Please contact [email protected] to submit your feedback and shape our campaign.
