© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
The Leasehold and Freehold Reform Act 2024 (LaFRA) represents a significant shift in property ownership laws in England and Wales, aiming to enhance the rights of residential leaseholders, this being flat and house owners.
While it received Royal Assent on 24th May 2024 only a few provisions were brought into effect then, and it wasn’t until the end of January that the first change relating to enfranchisement rights came into effect. This was the removal of the requirement to have owned your flat or house for two years before you could claim an extended lease or the freehold to your house.
Now a number of provisions of the LaFRA relating to the Right to Manage (RTM) have been brought into effect by the Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025, which were made on February 6, 2025, and came into force on March 3, 2025.
Previously, leaseholders could only exercise the RTM if their building's non-residential areas did not exceed 25% of the total internal floor area. The recent reforms have increased this threshold to 50%, thereby allowing leaseholders in buildings with substantial commercial spaces to collectively assume management responsibilities.
Under the new provisions, the financial burden on leaseholders initiating RTM claims has been alleviated. The default position now is that RTM companies and their members are not liable for the landlord's costs incurred due to the service of a claim notice, unless specified by Sections 87A and 87B of the Commonhold and Leasehold Reform Act 2002. This reform reduces potential financial deterrents for leaseholders considering RTM.
The First-tier Tribunal (FTT) has been granted jurisdiction to enforce obligations under the RTM legislation, replacing the previous role of the County Court. This shift aims to streamline the enforcement process and provide a more specialized forum for resolving RTM disputes.
So what can we expect next?
The proposed changes to valuation are the most eagerly awaited element of the LaFRA; this includes scrapping marriage value and fixing the rates used to calculate the other elements of the premium payable.
Marriage value can represent a large element of the premium payable for leaseholders, i.e. flat owners, with less than 80 years left to run of their leases. So they will be trying to work out whether it is worth the risk of waiting to see if the Government implements this provision. If they are disappointed by a government that rows back on this change, then they will be penalised by a rise in the premium payable as the marriage value element payment will increase with time.
Those with onerous ground rents will want to wait to claim a new lease in a world where the onerous element is ignored for the purpose of the calculation of the premium.
All leaseholders will hope that rates are set at a level that moves value to them from the landlord.
Flat owners with well over 80 years of their lease left to run and non-onerous ground rents may feel that it is not commercially worthwhile waiting for the valuation changes. They may however, want to wait for the longer extension (990 rather than 90 years) and the removal (broadly speaking) of the obligation to reimburse their landlords costs which in many cases may save them thousands of pounds.
There are many other changes that may be important based on a leaseholder’s specific circumstances.
As if that were not enough for leaseholders and landlords alike to ponder, the Government published its white paper on Commonhold on the same day as these latest provisions came into force.
The Commonhold White Paper outlines comprehensive reforms to reinvigorate commonhold and so enable a transition from the existing leasehold system for flats in England and Wales.
Key Proposals from the White Paper:
Ban on New Leasehold Flats: The government plans to prohibit the sale of new flats under leasehold arrangements, making commonhold the default tenure. This shift aims to grant homeowners full ownership rights without the limitations of leasehold terms.
Simplified Conversion to Commonhold: The proposed reforms are intended to streamline the process for existing leaseholders to convert their properties to commonhold, reducing legal complexities and associated costs.
Enhanced Homeowner Control: Under commonhold, property owners will have direct input into building management decisions, including budgeting and maintenance, along with eliminating the influence of external landlords.
Strengthened Protections: The new system will introduce mandatory reserve funds, public liability insurance, and clearer governance structures to ensure the financial stability and proper management of commonhold associations.
We may see the Renters Reform Bill 2024 become law this summer at the rate it is moving through parliament; as it is halfway through the House of Lords system currently.
It promises to introduce comprehensive reforms to the private rental sector in England and Wales, aiming to enhance tenant protections and create a more equitable housing market.
Of course, it may have the effect of persuading more landlords to sell and so reduce the available stock and increase rents leading perhaps to greater rent controls and leaving us where we were when the current system was introduced to create just that rental stock.
The bill eliminates Section 21 'no-fault' evictions, preventing landlords from terminating tenancies without providing a valid reason. This may come into effect immediately on the Bill becoming an Act.
All existing and new fixed-term assured shorthold tenancies (ASTs) will convert to periodic tenancies. This shift allows tenants to remain in their homes indefinitely, with the flexibility to leave by providing two months' notice. Landlords can regain possession only on specific grounds, such as selling the property or moving in themselves.
The bill limits rent increases to once per year, requiring landlords to provide at least two months' notice before implementing any hike. Tenants have the right to challenge unjustified increases through the First-tier Tribunal, ensuring rents remain fair and in line with market rates. This meaning there will be a commercial pressure on landlord’s not to seek increases and this may soften rents.
To prevent unfair competition among prospective tenants, landlords and letting agents must advertise properties at a fixed price and are prohibited from accepting offers above this amount.
A new Private Rented Sector Landlord Ombudsman will be created to resolve disputes between tenants and landlords efficiently and impartially. All private landlords will be required to join this service, which can mandate actions such as apologies, information provision, remedial work, or compensation payments.
The bill mandates the creation of a comprehensive database to register landlords and their properties. This may involve additional costs for landlords.
Tenants will have the right to request permission to keep pets in their rented properties. Landlords must consider these requests reasonably and cannot refuse without a valid reason. They may require tenants to obtain pet insurance to cover potential damages.
The bill strengthens protections against discrimination, making it unlawful for landlords to refuse tenants based on their receipt of benefits or because they have children. This measure promotes inclusivity and fairness in the rental market.
A new 'Decent Homes Standard' will be enforced in the private rented sector, ensuring properties are safe, clean, and in good repair. Local councils will have enhanced powers to enforce compliance, including imposing fines on non-compliant landlords. Council’s entitlement to keep the fines may promote enforcement and management costs to landlords.
For severe or persistent breaches, such as unlawful evictions or failure to address serious hazards, fines can reach up to £40,000.
For initial or less serious violations, such as failing to provide a written statement of tenancy terms, local housing authorities can impose fines up to £7,000.
Landlords and agents who do not register with the Private Rented Sector Landlord Ombudsman or the new Private Rented Sector Database may face fines starting at £7,000, escalating to £40,000 or criminal prosecution for ongoing non-compliance.
Tenants can apply for Rent Repayment Orders to reclaim rent from landlords who have committed certain offenses. The maximum reclaimable amount has been increased from 12 to 24 months' rent under the new bill.
While enhancing tenant rights, the bill also provides landlords with clear grounds for possession, such as rent arrears, antisocial behaviour, or the landlord's intention to sell or occupy the property. However, landlords cannot evict tenants within the first year of the tenancy under these grounds.
These reforms aim to balance the interests of tenants and landlords, fostering a fairer and more stable rental market.
Conclusion
Landlords are facing enhanced tenant rights across the piece; while flat owners for example may welcome their improved position as against their landlords they may, in turn, suffer significant costs and a reduction in income from letting their property.
Renters may welcome improved bargaining strength but find this means they have fewer private landlords to bargain with.
Flat owners trying to decide whether to wait for the valuation and other changes to come into force from LaFRA have a difficult decision to make particularly if they currently have marriage value to pay.
While Commonhold looks set to become the dominant form of tenure enfranchisement rights remain relevant as flat owners will need to acquire the freehold as a stepping stone to converting to Commonhold and the position of those who do not participate will be affected by that.
It remains to be seen how Commonhold is received; flat owners may miss the days of leasehold.
Mark Vinall, Partner, Ashley Wilson LLP