LEASEHOLD REFORM UPDATE FROM BOYDENS - JANUARY 2025

As many of our leaseholders will be aware, Boyden's has been a member of The Property Institute for many years. The Property Institute (TPI) is a professional body dedicated to residential property managers in England, Scotland, and Wales, formed by the merger of the Association of Residential Managing Agents (ARMA) and the Institute of Residential Property Management (IRPM); its primary mission is to raise standards within the residential property management sector and improve the lives of residents and tenants by supporting its members through professional development and setting industry standards.

One of the benefits of our membership is our team at Boyden's is regularly updated on any changes to Government Policy or Regulation. This month is our first Block & Estate Management Blog which we hope you will find useful and interesting as it discusses Leasehold & Freehold Reform.

A GENERAL INSIGHT ON THE CHANGES: For several years, the previous Government discussed reforming the Leasehold Sector to improve fairness. The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024 under the previous Conservative Government but many of the features have not yet come into effect. The second reading is due to take place in the near future and more changes are likely to be introduced. Below is a snapshot of what is included but this is by no means a full list.

• It will be cheaper and easier for leaseholders to extend their leases or purchase a share in the Freehold of their block. There will also be a new legal right to buy out the ground rent without extending the lease at the same time.

• Increasing the lease extension term from 90 years for flats and 50 years for houses to 990 years. This will provide more security to leaseholders and will remove the hassle and expense of future lease extensions.

• The requirement for a new leaseholder to have owned their house or flat for 2 years before they can extend their lease or buy their freehold will be removed.

• It will be cheaper and easier for leaseholders to take over the management of their building, appointing an agent of their choice.

• The process of buying or selling leasehold property will be cheaper and quicker by setting a maximum time frame and fee for providing sales information.

• Homeowners on private and mixed estates will be granted comprehensive rights of redress, so they receive more information about what charges they pay together with the ability to challenge how reasonable they are.

• Banning excessive buildings insurance commissions for managing agents and freeholders. These will instead be replaced with transparent and fair handling fees.

WHAT’S BEEN INTRODUCED SO FAR?

The following provisions came into force on 24 July 2024, two months after the bill received royal assent:

• New restrictions have been introduced on pursuing rent charge arrears (such that now a demand statement must first be served in a prescribed format at least 30 days before taking any action)

• An amendment to the Building Safety Act to allow flat owner controlled freehold companies and RTM companies the right to recover costs under Schedule 8 of that Act (where otherwise ordinarily the landlord cannot recover costs under the service charge) in relation to the pursuit of a ‘relevant defect’

• The repeal of Section 125 of the Building Safety Act 2022 and its replacement with a new Section 125A dealing with the duties of an insolvency practitioner appointed in respect of a ‘responsible person’ (either an ‘accountable person’ for higher risk buildings or the owner or party responsible for the common parts of a ‘relevant building’)

WHAT DOES THE GOVERNMENT PLAN FOR 2025?

This month, Matthew Pennycook, Minister of State for Housing and Planning, confirmed that leaseholders can exercise their right to extend their lease or buy their freehold immediately upon purchasing a leasehold property, rather than wait two years. This comes into effect from February 2025.

The Government is also planning to ban opaque and excessive buildings insurance commissions for freeholders and managing agents, replacing these with transparent and fair handling fees.

The sale of new leasehold houses will be banned other than in exceptional circumstances, every new house in England and Wales will be freehold from the outset.

In the spring, Right to Manage provisions will be brought into force making it easier for leaseholder to take control of their buildings. There was a restriction on these preventing buildings which have commercial units making up over 25% of the block from obtaining the Right to Manage. This will be extended to 50% bringing more buildings into the criteria.

The Government will be consulting on service charge reforms and will be drafting legislation on leasehold and commonhold reform. We understand that the Government is working towards banning new flats being sold as leasehold but instead taking up the tenure of Commonhold. This will not affect existing leasehold developments but will mean new build blocks of flats will work under a different system. As this progresses, we will endeavour to update you further as we monitor the changes in our industry.

If in the meantime you have any queries regarding the above feel free to contact me.

Alex Kane – January 2025