Since the Law Commission reported in January 2020 Brady Solicitors have been commenting on the expected leasehold reform. Following the statement on 21 November 2024 from the Minister of State for Housing and Planning, Matthew Pennycook, we look at some of the key information we can take away from it.
Brief Background
The Act has been controversial throughout its development following the Law Commission’s recommendations published in July 2020. Having been included in the ‘wash up’ process of almost completed legislation prior to the election, the new Government stated their intention to proceed with the reform in the King’s Speech, and stated they intended to review the Law Commission’s recommendations initially.
We now have Matthew Pennycook’s statement on Leasehold Reform, which provides us with some further clarity, whilst a large amount of uncertainty around the reform and it’s potential impact remains. However, below we detail five of the key takeaways from the statement:
1. Removal of the Two-Year Rule for Leaseholders
One of the most significant proposals is the plan to abolish the two-year ownership rule before leaseholders can initiate an lease extension or enfranchisement claim. This change is designed to give leaseholders faster access to their legal rights, removing an obstacle that has often left homeowners waiting for extended periods to begin the process.
This means leaseholders will have more immediate access to enfranchisement rights, simplifying their ability to take control of their properties. Freeholders and managing agents must be prepared for an increase in enfranchisement claims as barriers to action are removed, as well as an increase in leaseholders looking to extend their lease.
2. Consultation on Premium valuations
The Government are looking to consult on the valuation rates used to calculate the premiums involved in the lease extension and enfranchisement process, with the summer of 2025 targeted for consultation to take place. This is a critical step towards ensuring leaseholders aren’t overburdened by excessive costs while maintaining a fair balance for freeholders, but until further information is provided on the valuation method it is not possible to comment accurately on what impact this may have.
3. Regulation for Managing Agents
This seems to be back on the agenda and is broadly welcomed by the sector. The work done by Lord Best in 2019 and supported by ARMA (now amalgamated into The Property Institute) seemed to provide a working blueprint.
4. Secondary Legislation to Address Technical Issues
The Government’s recent statement highlighted the need for secondary legislation to address outstanding technical and procedural issues in leasehold and commonhold law. This includes streamlining processes, closing loopholes, recognising the complexity of the block management dynamic and ensuring that the system is fit for purpose. Bradys welcome the mention of further consultation on legal fees and service charge disputes to ensure working block management sector Whilst this will help ensure there are no unintentional knock effects from the changes to legislation, it will mean further delays to when the reform will take effect.
5. Long-Term Goals for Enfranchisement and Commonhold
While the immediate focus is on reforming leasehold law, the Government’s statement also reaffirmed their commitment to long-term goals, which includes making enfranchisement more affordable, in what it sees as a move towards greater property ownership fairness.
Summary
In summary the statement from the Minister of State for Housing and Planning informs us that the two year rule for lease extensions and enfranchisement will be removed as soon as January, enabling anyone waiting for the two year period to pass to proceed soon with either process. Additionally, the statement makes it clear that the Government continue to be behind the reasoning for the reform, but believe it is not fit for purpose in its current form, with further consultation and legislation being required before it comes into effect.
These reforms represent significant changes in leasehold and freehold property management. As we see developments in secondary legislation or any further clarity on implementation timelines Bradys Solicitors will provide updates. For further information on this or any leasehold issues please get in touch and we’d be happy to help.
