Key Leasehold Reforms Passed Before 2024 Election | Guild of Residential Landlords

MPs made leasehold reforms law in England and Wales before dissolving Parliament for Election 2024, but they dropped a key policy - the proposed cap on ground rents due.

The Leasehold and Freehold Reform Act 2024 was rubberstamped in the Commons and Lords in the wash-up of legislation still navigating Westminster.

The bill was designed with a clear aim to make owning a leasehold home fairer and more affordable.

Residential leaseholders have the right to live in a property for the term set out in the lease but do not own the land on which the building sits. The land belongs to the freeholder, and leaseholders pay the freeholder an annual charge called ground rent for using the land.

Until around 2010, leasehold homes were mainly flats, but developers grasped the opportunity to make more money by selling thousands of houses and bungalows as leasehold homes. Many of the leases contained a ‘doubling’ clause that automatically increased ground rents and service charges for permission, like extending a home, extending a lease, or buying the freehold.

The new leasehold rules

In 2019, the government promised to revamp the leasehold system by capping ground rents, which would halt the sale of leasehold houses. While not fully meeting these promises, the new law marks a significant step in that direction.

The significant new rules under the act include;

Streamlining the process for leaseholders to buy the freehold to their homes
Defining a standard lease extension as 990 years instead of 50 years for houses and 90 years for flats
Introducing standard format service charge invoices to make the comparison clearer and the bills easier to challenge at tribunals.
Scrapping the requirement for leaseholders to pay the freeholder’s legal costs when service charges are challenged
Bringing in a more accessible and cheaper process for leaseholders to take over the management of a building
Banning the sales of leasehold houses except under exceptional circumstances

Ground rent cap axed

Controversially, a proposal to limit ground rents was dropped from the bill. A cap of £250 a year for 20 years was included in the bill but deleted in the wash-up.

“The Act will also remove barriers for leaseholders to challenge their landlords’ unreasonable charges at a tribunal,” said a government housing spokesman.
“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.”