Leaseholders to benefit from new rules
Last month, Housing Minister, Matthew Pennycook, signed new regulations that will remove the long-standing requirement for leaseholders to have owned their lease for two years before they can extend it or buy their freehold. This change, a key commitment under the Government’s leasehold reform agenda, is set to come into force at the end of January.
End of the two-year rule
From February onwards, leaseholders will have the right to extend their lease or purchase their freehold as soon as they acquire the property, eliminating a major barrier that previously delayed their ability to secure long-term stability.
However, while this change is seen as a positive step, its immediate impact is expected to be limited.
Many leaseholders may hold off on taking advantage of the new rules, as other critical elements of leasehold reform—such as measures aimed at reducing the cost of lease extensions and enfranchisement—are still a long way from implementation.
The Government's progress on broader leasehold issues, including abolition of ‘marriage value’, work to establish commonhold as the default tenure for flats, and ground rent reform, is slow, leaving the current system largely unchanged.
While the removal of the two-year ownership requirement is a welcome move, without further action to address the affordability and complexity of leasehold ownership, the benefit for leaseholders will remain limited.
The changes signal incremental progress, but many leaseholders are still waiting for more comprehensive reforms, which are likely to take years, rather than months, to implement.
Right to Manage restrictions eased
Further changes are set to come into force on 3 March 2025 that will entitle more leaseholders to exercise their Right to Manage (RTM). Under the Commonhold and Leasehold Reform Act 2002, leaseholders have the right to take control of their building in some circumstances via an RTM company.
Currently, mixed-used buildings that contain non-residential floorspace of more than 25% are excluded from RTM provisions. However, the Leasehold and Freehold Reform Act introduces a higher threshold of 50%, meaning thousands more leaseholders will qualify.
As well as enabling more leaseholders to take over management of their buildings, the regulations will also prevent freeholders from requiring legal fees to be paid by leaseholders when they make an RTM application.
