The Most Significant Leasehold Reform in Decades
The Leasehold and Freehold Reform Act 2024 (LAFRA 2024) received Royal Assent on 24 May 2024 and represents the most far-reaching reform of leasehold law in England and Wales since the Leasehold Reform, Housing and Urban Development Act 1993. The Act significantly strengthens the rights of leaseholders and fundamentally changes the economics of leasehold property ownership.
If you own a leasehold flat or house — or are considering buying one — understanding these reforms is essential. Legal Merchant's panel solicitors are fully up to date with the changes and can advise on how they affect your specific situation.
990-Year Lease Extensions
Perhaps the most significant reform is the extension of the standard statutory lease extension from 90 years to 990 years. Previously, qualifying leaseholders could extend their lease by 90 years above the unexpired term (so a lease with 80 years remaining could be extended to 170 years). Under LAFRA 2024, leaseholders can now extend to a full 990 years from the date of the extension.
This is a transformative change. A 990-year lease is, for all practical purposes, equivalent to freehold ownership in terms of lender acceptability and market value. It eliminates the need to repeatedly extend leases over time and the associated costs.
Abolition of Marriage Value
Under the previous legislation, when a lease had fewer than 80 years remaining, leaseholders were required to pay a share of the "marriage value" — the increase in the combined value of the freehold and leasehold interests that results from the extension. This could add tens of thousands of pounds to the extension premium for short-lease properties.
LAFRA 2024 abolishes marriage value entirely. Regardless of the remaining lease term, leaseholders will no longer be required to pay marriage value as part of the statutory lease extension premium. This significantly reduces the cost of extending short leases and removes the financial incentive for freeholders to delay extensions.
Abolition of the 2-Year Qualifying Period
Under the old legislation, leaseholders were required to have owned their property for at least two years before they could exercise the statutory right to extend their lease. LAFRA 2024 abolishes this qualifying period. From the date a leaseholder acquires a qualifying leasehold property, they have the immediate right to serve a statutory notice and commence lease extension proceedings.
This is particularly valuable for new buyers of short-lease properties, who previously faced a two-year wait before they could take action to protect their investment.
Ground Rent Reforms
LAFRA 2024 builds on the changes already introduced by the Leasehold Reform (Ground Rent) Act 2022, which set ground rent at a peppercorn (effectively zero) for new residential long leases granted after June 2022.
Under LAFRA 2024:
- The government has powers to restrict or regulate ground rents in existing leases — though implementation of these powers through secondary legislation is still awaited
- Extended leases completed under the statutory process must be granted at a peppercorn ground rent
- Leaseholders have new rights to challenge ground rent increases and escalation clauses
Enhanced Rights on Service Charges
LAFRA 2024 introduces new rights for leaseholders to scrutinise and challenge service charges:
- Landlords must provide standardised, transparent service charge accounts in a prescribed format
- Leaseholders have enhanced rights to obtain information about how service charges are calculated and what they include
- New restrictions on the recovery of legal costs from leaseholders in service charge disputes
- Enhanced protections for leaseholders facing unreasonable or excessive service charge demands
Right to Manage Reforms
The Right to Manage (RTM) allows qualifying leaseholders to take over the management of their building from the freeholder without having to prove any fault on the freeholder's part. LAFRA 2024 expands RTM rights by:
- Reducing the threshold of qualifying leaseholders needed to form a Right to Manage company
- Removing the requirement that 25% of the building must be in non-residential use to exclude RTM eligibility (reversing the existing rule)
- Clarifying the rights and protections available to RTM companies
Collective Enfranchisement
Collective enfranchisement — the right of qualifying leaseholders to collectively purchase the freehold of their building — has also been reformed. Key changes include:
- New valuation methodology reducing the premium payable to freeholders
- Abolition of marriage value in collective enfranchisement premium calculations
- Simplified process for leaseholders to establish eligibility and commence proceedings
What Should Leaseholders Do Now?
If you own a leasehold property, the reforms under LAFRA 2024 represent a significant opportunity. Here is what you should consider:
- Check your lease length: If your lease has fewer than 90 years remaining, you should consider a statutory lease extension as a matter of priority — even more so now that marriage value has been abolished and the cost is lower
- Review your service charges: Use your new rights to request detailed accounts and challenge any charges you believe are unreasonable
- Consider RTM: If you are unhappy with your building's management, now may be an excellent time to explore the Right to Manage with your fellow leaseholders
- Take professional advice: The reforms are complex and some provisions are being implemented in stages. Speak to a Legal Merchant panel solicitor for advice tailored to your specific lease and circumstances
