The UK government has introduced a key provision of the Leasehold and Freehold Reform Act 2024, that took effect on 31 January 2025. This change marks a significant improvement for leaseholders looking to extend their leases. The Leasehold and Freehold Reform Act 2024 (CommencementNo. 2 and Transitional Provision) Regulations 2025 was signed by the Housing Minister, Matthew Pennycook on 22nd January 2025.
What’s New?
The current two-year ownership rule, which required leaseholders to own their property for at least two years before they could extend their lease is being abolished.
Why Does This Matter?
Previously, leaseholders were required to wait for two years before making an application for a lease extension. This waiting period created barriers, particularly for those who needed lease extensions to meet mortgage requirements or to facilitate property sales. If a leaseholder had not taken an assignment of a claim from their seller, they had no immediate rights upon purchase.
With the removal of this requirement:
- Leaseholders can now act immediately after becoming the registered owner to extend their lease or purchase their freehold.
- The process for buyers is simplified, eliminating the need for complex legal workarounds such as assigning Section 42 notices from a seller to a buyer during the conveyancing process.
- Temporary adjustments will be made to prescribed forms used in lease extension and enfranchisement claims until updated versions are introduced.
- This will also make the lease extension process cheaper as leaseholders can act straight away without a premium increase due to the lease term dropping.
Benefits for Leaseholders
This reform brings several key benefits:
- Leaseholders now have greater flexibility and control over their property rights, enabling them to act without delay.
- Buyers no longer face a two-year wait to extend their lease or purchase the freehold of their house, making transactions smoother and less stressful.
- For those with mortgage requirements tied to lease length, this change allows for quicker action to meet lender criteria, providing increased certainty and security.
Future Developments
This reform is the first step in a wider overhaul of the leasehold system. The government has outlined further measures to simplify and modernise property ownership, ensuring leaseholders can better secure their long-term interests.
Housing Minister Matthew Pennycook has released a Ministerial Statement outlying the Government’s objectives to reform the system further with a draft bill to be published later this year and further consultations and a White Paper in the summer.
What to Do Next
If you’re a leaseholder, now is the time to review your options and take advantage of this important change that came into force on 31 January 2025.
For more information or to discuss your lease extension or freehold purchase, feel free to contact us for a no-obligation consultation.