LEASEHOLD AND FREEHOLD REFORM ACT UPDATE

The Leasehold and Freehold Reform Act has now been passed, although it has not yet come into force. 

The aim of the Act is to strengthen consumer rights by introducing a series of new measures that focus on both existing and new build properties. The NRLA has summarised these changes as the following:

• Banning the sale of new Leasehold houses so that every new house in England and Wales will be sold Freehold. 
• Making the process of extending a lease or buying a Freehold far simpler, whilst standardising lease extensions to 990 years, reducing the need for repeated extensions.
• Excluding ‘Marriage Value’ when calculating the premium on lease extensions.
• Standardising the format of service charge demands so Leaseholders have greater transparency about what they are being charged. 
• Making it easier to access redress by requiring Freeholders who manage their property to belong to a redress scheme. Currently only managing agents need to belong to a scheme. 
• Removing the requirement to pay the Freeholders costs when exercising their enfranchisement rights, making it easier to buy the Freehold. 
• Setting maximum time limits for providing home buying and selling information, and setting a maximum fee providing this information. 
• Giving homeowners on private and mixed tenure estates comprehensive rights of redress, so they receive more information about what charges they pay, and the ability to challenge how reasonable they are. 
• Scrapping the presumption that Leaseholders pay their Freeholders’ legal costs when challenging poor practice.  
• Banning ‘opaque and excessive’ buildings insurance commissions for Freeholders and managing agents, replacing these with transparent and fair handling fees. 
• Removing the requirement for a new Leaseholder to have owned their house or flat for two years before they can extend their lease or buy their Freehold. 

Andrew Smith, Managing Partner at Smith and Sons commented: “It is good to see these measures introduced. Being aware of legislative changes across the property sector that will affect our clients is incredibly important, ensuring we can provide up to date and relevant advice.“

Whilst the act has been passed, there will be a need for further secondary legislation and therefore it is unlikely to come into force until 2025 or 2026.

For information on a range of property related matters that Smith and Sons offer, please visit our website at www.smithandsons.net