Leasehold and Freehold Reform Act Becomes UK Law

Homeowners will receive more rights, power and protections over their homes under the Leasehold and Freehold Reform Act which became law last week.

The Act will make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges. The Act will also remove barriers for leaseholders to challenge their landlords’ unreasonable charges at Tribunal.

It will further ban the sale of new leasehold houses other than in exceptional circumstances, end excessive buildings insurance commissions for freeholders and managing agents, and scrap the requirement for a new leaseholder to have owned their house or flat for two years before they can buy or extend their lease.

The new powers also grant freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders, and equivalent rights to transparency over their estate charges, and help more leaseholders take over the management of their property if they want to.

Leaseholders in some buildings are barred from taking over the management of the site or buying its freehold if more than 25% of its floor space is commercial – such as shops or offices on the ground floor. But this limit will now be increased to 50% to enable more homeowners to access Right to Manage or the right to a collective enfranchisement.

The Act – which has officially received Royal Assent – strengthens existing, and introduces new, consumer rights for homeowners by:

• Making it cheaper and easier for people to extend their lease or buy their freehold so leaseholders pay less to have more security in their home.
• Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats), so leaseholders can enjoy secure ownership without the hassle and expense of future lease extensions.
• Giving leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged.
• Making it easier and cheaper for leaseholders to take over management of their building, allowing them to appoint the managing agent of their choice.
• Making it cheaper for leaseholders to exercise their enfranchisement rights as they will no longer have to pay their freeholder’s costs when making a claim.
• Extending access to redress schemes for leaseholders to challenge poor practice. The government will require freeholders, who manage their building directly, to belong to a redress scheme so leaseholders can challenge them if needed – managing agents are already required to belong to a scheme.
• Making buying or selling a leasehold property quicker and easier by setting a maximum time and fee that for home buying and selling information.
• Granting homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are.

The Act will further benefit leaseholders by:

• Scrapping the presumption that leaseholders pay their freeholders’ legal costs when challenging poor practice that currently acts as a deterrent when leaseholders want to challenge their service charges
• Banning opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees.
• Banning the sale of new leasehold houses so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.
• Removing the requirement for a new leaseholder to have owned their house or flat for 2 years before they can extend their lease or buy their freehold.