Leasehold And Commonhold Reform – Latest Government Statements

Latest statements

Statements made by the Minister for Housing and Planning Matthew Pennycook in House of Commons debates on Leasehold Reform such as those on 20th January throw light on the timing of the implementation of LaFRA and the Leasehold and Commonhold Reform Bill:

Leasehold - Leasehold is to be brought to an end by the end of this Parliament. To achieve that changes to Commonhold need to be introduced via the Leasehold and Commonhold Reform Bill. 

Service charges and liability for landlord’s costs - Consultation on how these provisions in the Leasehold and Freehold Reform Act 2024 should be enacted will be undertaken “in the coming months”. They intend to bring these measures into force as quickly as possible after that.

Valuation & Marriage Value - There is no change to the proposed timing for the valuation changes; he re-stated that “we discovered on assuming office that the previous Government had passed the Act with a number of specific but serious flaws that prevent certain provisions, including those relating to enfranchisement valuations, from operating as intended. We need to fix those flaws through primary legislation, and we intend to do so at the earliest possible opportunity.”

Managing agents - in response to a question around high services charges he re stated that the Government will increase regulation of managing agents. They are considering the recommendations made in Lord Best’s 2019 report ‘Regulation of Property Agents’ ie creating an independent regulator to oversee property agents in England, requiring all property agents to be licensed, creating a unified Code of Practice that coves agents letting and selling residential property too.

Abolition of the Two-Year Ownership Rule

On 23 January 2025, Housing Minister Matthew Pennycook signed regulations that abolish the two-year ownership requirement for leaseholders. This came into effect on 31st January. 

Historically, leaseholders had to wait two years before they were eligible to either extend their flat lease or purchase the freehold to their house. Under the new provisions, this qualifying period is removed, enabling leaseholders to act immediately after acquiring their property.

This means, for example, that the buyer of a flat who wants to get on with the extension of the lease no longer need to incur additional cost and the potential risk of arranging for their seller to commence the process for them to see through.

It will also enable those who bought within the last few years to commence a claim sooner than they expected.

Right to Manage Reforms

The Government has confirmed that further changes to the Right to Manage (RTM) process are scheduled for Spring 2025 (written statement of 21 November 2024). These reforms aim to make it easier for leaseholders in mixed-use buildings to take over management from their freeholders. Key features of the reforms include:

• Expanding eligibility for RTM claims, particularly in buildings with higher proportions of commercial space.

• Abolishing the requirement for leaseholders to cover the legal costs of their freeholders when pursuing RTM claims, a change designed to make the process less financially burdensome.

This measure reflects the Government’s broader aim of empowering leaseholders to take greater control over the management of their properties.

Future Reforms on the Horizon

Later in 2025, the Government is expected to publish the Leasehold and Commonhold Reform Bill, a major piece of legislation designed to modernize the commonhold system and address long-standing issues within the leasehold sector. Areas likely to be covered include:

• Capping ground rents.

• Further simplifying the enfranchisement process.

The Government has reiterated its commitment to making commonhold a more viable alternative to leasehold, with additional reforms expected to ensure that commonhold becomes a practical and attractive option for developers and homeowners alike.

Conclusion

The abolition of the two-year ownership rule represents the first step in the Government’s implementation of the Leasehold and Freehold Reform Act with regard to enfranchisement rights.

The key question for Leaseholders and their landlords is what the Government decides to do with the valuation aspect and whether that will prove to be worth waiting for. Will it for example row back on scrapping of marriage value, or undermine the effect of that with other changes under pressure from landlords? 

The planned consultation will hopefully provide some insight, but leaseholders will have to wait for the further legislation to be passed to be sure. 

It is very difficult for those who currently have marriage value to pay as their premium will increase if they wait only to find that the Government rows back on this change. 

For those with well over 80 years remaining of their lease term and no pressure to extend such as a sale then with the luxury of time they can wait to see whether the valuation changes make a material difference to the premium they must pay; if they have an onerous ground rent then this may be particularly helpful. 

If the changes to landlord’s costs and the introduction of the longer extension (990 rather than 90 years) are introduced prior to the valuation changes then such leaseholders may decide not to wait for them. 

With further reforms expected throughout 2025, both leaseholders and freeholders should seek legal advice to understand how these changes will impact their rights and obligations. As ever, professional guidance will be essential to navigating the shifting landscape of leasehold reform.

Mark Vinall, Partner, Ashley Wilson LLP