Key Points from the Government Statement on Leasehold and Commonhold Reform

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In a statement published on 21^st November 2024, the government has outlined its plans to address long-standing issues within the leasehold/freehold system, including ending the “feudal leasehold system” that has caused significant challenges for millions of homeowners. Below are the key points from the statement:

The Leasehold and Freehold Reform Act 2024

The Leasehold and Freehold Reform Act 2024 (“the Act”) is a piece of legislation designed to address persistent issues in the leasehold system, including escalating ground rents, high service charges, and unfair consent fees, and to make it cheaper and easier for leaseholders to extend their leases or collectively acquire the freehold of their building to give leaseholder security over their property in the long term.

However, key flaws in the legislation as drafted mean that primary legislation is required to rectify these flaws before the Act can be fully implemented. These issues include a loophole in valuation reforms for lease extension and collective enfranchisement claims and the exclusion of shared ownership leaseholders from 990-year lease extensions. The Government wish to ensure that the reforms that are implemented are fit for purpose and therefore time is required to ensure that all the key issues are resolved. The implementation of all the key provisions of the Act is therefore likely to take considerably more time that originally thought when the Act was given Royal Assent in the wash up period of the last Parliament.

Broad Target Timelines for Implementation

The Government have confirmed that they intend to implement specific sections of the Act so that:-

1. From January 2025 leaseholders will no longer have to wait two years before extending their lease or buying their freehold.
2. By Spring 2025, expanded “right to manage” provisions will allow leaseholders in mixed-use buildings with up to 50% non-residential floorspace to collectively make a claim for the right to manage their building.

Service Charges, Costs, and Transparency

The government is prioritising reducing financial burdens on leaseholders. In 2025, consultations will focus on banning commissions for buildings insurance and requiring landlords to seek tribunal approval before passing legal costs to leaseholders. Easier methods for challenging unreasonable service charges will also be introduced. These changes aim to create greater transparency and fairness in service charges.

Reducing the Costs of Enfranchisement

By Summer 2025, consultations will begin on revising valuation rates to reduce the costs of enfranchisement for leaseholders.

Commonhold Reform

The government is committed to transitioning from leasehold to commonhold as the preferred tenure for flats. In early 2025, a White Paper will outline a comprehensive legal framework for commonhold. A Draft Leasehold and Commonhold Reform Bill is expected in the second half of 2025, which will ban new leasehold flats, set a path for converting existing flats to commonhold, and introduce new protections for leaseholders.

Managing Agents and Fleecehold

To improve standards in property management, the government plans to introduce mandatory professional qualifications for managing agents in 2025. Additionally, consultations will be held to address “fleecehold” practices by reducing unfair private estate management charges that burden residential freeholders.

Why This Matters

The reforms aim to provide homeowners with greater security, fairness, and control over their properties. The government’s emphasis on careful, thorough implementation reflects its commitment to avoiding past mistakes and ensuring these changes benefit leaseholders and freeholders alike.

Link to the statement: https://questions-statements.parliament.uk/written-statements/detail/2024-11-21/hcws244