Back in 2017, the Conservative government pledged to ‘Improve consumer choice and fairness in leasehold.’ But making a commitment and delivering on it are two very different things – as Stuart Jacobs explains in this article.
Many landlords will feel that the 2024 Act is simply ‘another bat to beat them with’. However, it does contain some interesting and important provisions intended to recast the landlord-leaseholder relationship.
The Leasehold and Freehold Reform Bill was introduced to Parliament in November 2023. Yet by the time of last year’s general election, it still lacked the muscle to make it a truly effective piece of legislation. Michael Gove – then Secretary of State for Levelling Up, Housing and Communities – fast-tracked the Bill so that it became law in the last few hours of the Conservative administration.
Gove recognised that for the Act to be effective, secondary legislation or regulations would be needed, some of which would be difficult to put into practice. The Act was intended to strengthen leaseholders’ rights and, in doing so, would in some cases inevitably weaken those of landlords.
Ten key ways it goes about achieving this
1. Makes it cheaper and easier for leaseholders in houses and flats to extend their lease or freehold. It also includes the requirement to pay marriage value – perhaps the Act’s most controversial provision. While the new government has sensibly initiated a further consultation to determine how best to implement this change, the likely enormous loss to landlords is already the subject of a challenge in the courts. This could go to the European Court of Human Rights and take many years to resolve.
2. Increases the standard Lease Extension term to 999 years reducing ground rent to a peppercorn (zero f inancial value) upon payment of a premium. This is not a particularly controversial measure because leaseholders had been able to complete the same exercise but on the basis of a 90-year Lease Extension since the early 1990s.
3. Loosens the qualifying criteria so as to give more leaseholders the right to extend leases or buy their freehold. These measures have already been implemented by the removal of the two-year qualifying period required before leaseholders could apply for Lease Extensions.
4. Bans the granting of new leasehold houses (with some exceptions). Again, this is not a controversial measure, and it has already been implemented.
Improves the transparency of:
- a. Service charges and gives leaseholders a new right to request information about service charges and the management of the building.
- Administration charges and building insurance commissions.
5. While some landlords might argue that this is just a further unnecessary layer of administration for which leaseholders ultimately have to pay, few would argue that leaseholders should have a clear right to full information about the way in which their buildings are managed.
6. Changes the qualification threshold entitling leaseholders to impose right to manage companies (RTM) on landlords or enfranchise (purchase the freehold) for mixed use buildings in England to allow more buildings to qualify. The qualifying percentage of non-residential floor space in a building has been increased from 25% to 50% from 3 March 2025.
7. Removes the presumption that leaseholders pay their landlord’s legal costs when challenging poor practice and gives them a new right to apply to claim their legal costs from the landlord. Rather surprisingly, there has been relatively little opposition to this proposal from landlords.
8. Removal of the requirement that leaseholders pay their landlord’s costs on the grant of a lease extension, a collective enfranchisement or the creation of an RTM. Again, this is a controversial amendment because many landlords will cry ‘foul’, arguing why they should have to pay their own legal costs when being required to participate in a process which they did not initiate and was not of their making.
9. Extends access to redress schemes for leaseholders where the freeholder manages the property directly.
10. Ensures that relevant property sales information is provided to the leaseholders in a timely manner.
Many landlords will feel that the 2024 Act is simply ‘another bat to beat them with’. However, it does contain some interesting and important provisions intended to recast the landlord-leaseholder relationship. The Act’s more controversial aspects are likely to ‘run and run’, creating great uncertainty throughout the property world generally.
This uncertainty will not be resolved until there’s clarity regarding issues relating to the proposal to remove marriage value in particular and, to a lesser extent, the requirement that landlords pay their own costs when leaseholders initiate claims to enfranchise or purchase Lease Extensions.
About the author
Stuart Jacobs undertook his training to become a partner in a boutique London law firm and joined forces with RIAA Barker Gillette in 2014. Stuart is a versatile and experienced litigation lawyer focusing primarily on commercial, property and civil litigation. Over the years, he has successfully conducted many high-profile and ground-breaking cases in several different areas, including the confidential settlement regarding the compulsory purchase proceedings brought by the Secretary of State for Transport in relation to the acquisition of the buildings immediately in front of Euston Station, acquired for HS2 on behalf of Euston Estate.