The Leasehold and Freehold Reform Act 2024 became law on 24 May, making it over the legislative line in the two-day wash-up period following the unexpected calling of the election. So what are its key provisions and when will they take effect?

Ban on sale of new leasehold houses

The sale of new leasehold houses will be banned where the terms exceeds 21 years, although there will be certain exceptions for retirement homes, shared ownership leases and other niche leaseholds.

Statutory lease extensions increased to 990 years

Qualifying tenants of a house or flat will be entitled to a new lease for a term of 990 years (increased from 50 years for houses and 90 years for flats).

Stronger rights for leaseholders

Qualifying tenants will be able to claim a lease extension of their flats or buy the freehold of their house immediately on acquiring their lease. This will replace the previous requirement of a 2 year ownership period.

Qualifying tenants of flats will be able to exercise collective enfranchisement and right to manage rights where up to 50% of the internal floor space (excluding common parts) is used for non-residential purposes. This is a significant increase from the existing 25% threshold, and inevitably more mixed-use buildings will become eligible for enfranchisement and right to manage claims. They will also be able to compel freeholders to take leasebacks of commercial units and non-participating flats.

New valuation methods for enfranchisement and lease extensions

New valuation methods, including the scrapping of marriage or 'hope' values for leases will, in most cases, result in lower premiums being paid by leaseholders.

Leasehold information requests

Landlords will be required to respond to specified requests for information. Regulations are to be made which may cap the fees charged for this information, and landlords will also be fined for not replying to these requests within a time period to be set. This could have a major impact on property management companies, who may be reluctant to take on these services.

Impact on future lending and investment decisions

Most of these provisions will require detailed statutory instruments to be laid before Parliament before they can come into effect. Although the expectation is that this will not happen until next year or possibly 2026 depending on the priorities of the new government, these changes are on their way and both lenders and investors will need to factor them in when valuing a portfolio that includes residential leases.

Ground rents escape action – for now

Limiting existing ground rents proved too controversial to be included in the Act as it was hurriedly pushed through in the final two days of parliamentary business. In its election manifesto, however, Labour pledged to tackle what it described as "unregulated and unaffordable ground rents". The reprieve for landlords and investors is therefore likely to be relatively shorted-lived. Again, lenders and investors should consider how this may affect their decisions to lend on or purchase residential assets.

This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.