The leasehold system has long been a common form of property ownership in the UK. However, concerns about its complexity have led to widespread criticism, leading to calls for a reform. In response, the government introduced the ‘Leasehold and Freehold Reform Act 2024’ to address these concerns.
In this blog post, we’ll explore leasehold reforms, the key changes coming in 2025, their benefits for leaseholders, and how we can help.
What is a leasehold property?
A leasehold property is a building owned by an individual, but the land it stands on remains under the ownership of the freeholder (landowner). The individual holds a lease agreement with the freeholder, outlining the terms and duration of their use of the property. This arrangement is especially common for flats and commercial properties.
Lease terms can vary, typically ranging from 99 to 125 years when first issued, though some can be up to 999 years. When the lease expires, ownership of the property returns to the freeholder unless an extension is arranged.
Leaseholders are typically required to pay ground rent, service charges, and maintenance fees to the freeholder.
What are leasehold reforms?
Leasehold reforms are a series of legislative changes aimed at improving the rights and protections of leaseholders.
They address widespread concerns about the system, which has long been criticised for being expensive and unfair. Many leaseholders face unexpected fees, confusing contract terms, and limited control over their own property.
The introduction of the reforms aims to reduce financial strain and make property ownership fairer and more secure for future generations.
Key changes expected in 2025 and how they will benefit leaseholders
The introduction of the Leasehold and Freehold Reform Act 2024 marks a major step forward in improving leasehold property rights in England and Wales.
Building on previous reforms, the Act is designed to promote fairness, transparency, and affordability in homeownership. Key changes include:
Restrictions on unfair ground rent charges
The Act introduces further restrictions on escalating ground rents, with the potential for their complete abolishment in the future.
This builds on the 2022 ban on ground rents for new leases and demonstrates a continued effort to protect leaseholders from excessive, unpredictable price increases.
By tightening regulations, the government aims to create a fairer and more transparent system that prevents leaseholders from being burdened by rising, unjustified costs.
A new, straightforward approach to lease extensions
The process of extending leases is expected to become more straightforward and cost-effective, with an increase in the standard lease extension term and a reduction in associated fees.
These changes aim to make lease extensions more accessible and affordable, providing greater security for property owners who want to protect their investment and ensure long-term stability.
Additionally, the waiting period for leasehold extensions has been abolished as of the 31st January 2025, allowing leaseholders to initiate these processes immediately upon acquiring the property.
Previously, they were required to own their property for two years before being eligible to extend.
Regulations that outline service charge transparency
New regulations will require landlords and managing agents to provide clearer cost breakdowns for service charges. This will help leaseholders understand exactly what they are paying for, making it easier to identify any discrepancies.
The changes aim to reduce ambiguity and give leaseholders the confidence to challenge unfair fees, creating a more equitable system and build trust between property owners and managing agents.
A ban on leasehold houses
The government plans to ban the sale of new-build houses and flats as leasehold properties, ensuring that future homeowners gain full ownership rights without being tied to restrictive leasehold conditions.
This change will give leaseholders greater control over their property, protecting their investment and providing long-term financial security.
Transition from leasehold to commonhold for flats
The government has announced plans to make commonhold ownership the default for new flats, effectively phasing out the traditional leasehold system.
Under commonhold, flat owners fully own their properties and collectively manage common areas, eliminating issues related to fees and limited control inherent in leasehold agreements.
The impact the Leasehold and Freehold Reform Act 2024 will have on freeholders
The Act will reshape the landscape for freeholders, particularly in terms of financial returns and management responsibilities.
One major impact is a potential reduction in the overall value of freehold investments. With leaseholders gaining more rights and more opportunities to extend leases or purchase freeholds at a lower cost, freeholders’ may see a decline in the profitability of their holdings.
This shift could lead to changes in investment strategies, particularly for those who have traditionally relied on leasehold properties for a consistent income.
In addition to financial considerations, freeholders may face increased administrative burdens. Compliance with new regulations may require additional resources, especially for those who manage multiple properties or large developments.
How Cooklaw Solicitors can help
Navigating the complexities of leasehold reforms can be challenging, but we are here to provide expert guidance and support.
At Cooklaw Solicitors, we are experts in leasehold properties, with extensive experience advising clients on lease extensions, service charge disputes and more.
We provide clear, practical guidance to help you navigate complex leasehold regulations, ensuring your rights are protected.
Our specialist team stays up to date with the latest legal reforms, offering tailored advice to help you make informed decisions about your property.
If you need support adapting to the new regulations, or legal advice on your current leasehold property, contact a member of our team today.
