A Leaseholder’s Life in 2024

I remember when, many years ago, I began to delve into the UK property market and found it particularly challenging to understand the concept of property ownership in this country, given its substantial differences compared to the Italian system. In the UK, there are two main types of property titles: Freehold and Leasehold.

The coveted Freehold title entails ownership of both the property and the land it stands on, permanently. This concept of ownership is common for single-family homes and gives the owner full responsibility for maintenance and expenses, offering more control and direct accountability.

On the other hand, Leasehold ownership involves possessing the property for a specified period of time, as determined by the lease agreement, but not the land it sits on. This type of ownership is common for flats and some houses. At the end of the lease period, ownership reverts to the Freeholder unless the lease is extended. Leaseholders pay ground rent to the Freeholder and may face restrictions on property use.

Well, one of the Conservative Party’s manifesto proposals has materialised into a long-awaited law on 24th May 2024, which will be instrumental in changing the management of Leasehold properties. Therefore, while the title of ownership remains, some aspects will improve the lives of Leaseholders.

New Law – New Rules

The Leasehold and Freehold Reform Act 2024 is what will regulate the future of Leasehold properties, although it is not yet in effect. In fact, it is worth noting that only a few minor amendments to the Building Safety Act will come into force on 24th July 2024. Following the announcement of the UK General Election on 4th July 2024, both the government and opposition parties agreed that the Leasehold and related property rights reform bill would be considered by the House of Lords before the formal dissolution of Parliament. The bill was passed by the Lords without opposition and has now received Royal Assent.

The reforms aim to make the condition of Leaseholders much fairer and more accessible by changing the rules on lease extensions, ground rents, service charges, and the purchase of Freehold titles. For too long, Leaseholders have faced excessive costs to extend their lease contracts, with punitive ground rents that substantially increase every decade and opaque service costs. But let’s look at some of the significant points addressed by this new and much-anticipated law.

So, What’s New?

• Increase in the standard lease extension period to up to 990 years
• Reduction in lease extension costs
• Removal of the marriage value
• Transparency about management expenses and an end to opaque and excessive commissions regarding building insurance
• Facilitation for changing condominium administrators and complaint procedures
• Speeding up property transactions also due to simplified documentation
• Abolition of payments due for alleged legal expenses undertaken by Freeholders arbitrarily and perhaps unjustifiably
• Ban on the sale of new leasehold houses
• Requirement for Freeholders to be part of a specifically allocated entity, adopting precise codes of conduct
• Removal of the two-year ownership wait for lease extension purposes
• Elimination of the obligation for Leaseholders to pay Freeholders’ costs when they wish to exercise their right to buy the ownership right
• Abolition of the presumption that leaseholders must pay landlords’ legal costs when challenging poor practices.

Finally

The valuation process and the legal procedures involved, can still be quite complex to understand. In order to have a clear overview of your personal situation, whether you are leaseholders or aspiring to be, I suggest initiating a focused conversation with your property consultant. Additionally, it is beneficial to seek advice from a solicitor who can provide the best guidance for buying, selling, and managing a Leasehold property correctly.