Leasehold Reform January 2025
The landscape of leasehold property ownership in England and Wales is undergoing significant transformation, offering new opportunities and rights for leaseholders. The Leasehold and Freehold Reform Act 2024 (LAFRA) introduces pivotal changes to simplify and enhance the leasehold system. (www.lease-advice.org 2025)
Abolition of the Two-Year Rule
As of 31st January 2025, the government has abolished the two-year ownership requirement for leaseholders wishing to extend their lease or purchase their freehold. Previously, leaseholders were mandated to own their property for at least two years before initiating these processes. This reform enables leaseholders to act immediately upon acquiring a property, providing greater flexibility and potentially reducing associated costs.
Key Provisions of the Leasehold and Freehold Reform Act 2024
Beyond the removal of the two-year rule, LAFRA encompasses several other significant reforms:
- Extended Lease Terms: The standard lease extension term has been increased to 990 years for both houses and flats, up from the previous 50 years for houses and 90 years for flats. This change offers leaseholders long-term security without the need for future extensions.
- Service Charge Transparency: The Act mandates that freeholders or managing agents provide service charge bills in a standardised format, enhancing transparency and making it easier for leaseholders to scrutinise and challenge unreasonable charges.
- Empowering Leaseholders: LAFRA simplifies the process for leaseholders to take over the management of their building, allowing them to appoint a managing agent of their choice. It also removes barriers to challenging landlords’ unreasonable charges at tribunals.
- Ban on New Leasehold Houses**: The sale of new leasehold houses is prohibited, except in exceptional circumstances, ensuring that future houses are freehold from the outset.
How This Impacts Buying at Auction
These reforms significantly alter the leasehold market for auction buyers. Historically, short leases have often been a deterrent for bidders due to the costly and complex process of extending them. With the abolition of the two-year rule, investors and buyers can now purchase a leasehold property at auction and begin the extension or enfranchisement process immediately, potentially increasing the value of their investment more quickly.
This change could increase the number of leasehold properties appearing at auction, as sellers may find a larger pool of interested buyers willing to bid on properties with shorter leases. Additionally, more transparent service charge regulations provide greater confidence in leasehold purchases, reducing the risk of unexpected costs post-sale.
For investors, this reform means that previously unattractive leasehold properties could present excellent opportunities for capital appreciation. Buyers should conduct thorough due diligence before bidding, but with the proper knowledge and strategy, these changes could open new avenues for profitable investments.
Looking Ahead
While the abolition of the two-year rule is a significant milestone, the government acknowledges that further reforms are necessary to modernise the leasehold system fully. Future consultations will address lease extension and freehold purchase valuation processes, aiming to make these procedures more straightforward and cost-effective for leaseholders.
At Auction House London, we recognise these reforms’ profound impact on current and prospective property owners. We are committed to keeping our clients informed and supported through these changes. Please get in touch with our team of experts for personalised advice and assistance regarding how these reforms may affect your property decisions https://auctionhouselondon.co.uk/contact
The evolution of leasehold laws marks a positive shift towards a more transparent and equitable property market, empowering leaseholders with greater control and clarity over their property ownership. For those considering leasehold investments at auction, now is an opportune time to explore new opportunities in this evolving landscape.
There are a selection of short leasehold properties in our February 2025 Auction here is an example of one of them https://auctionhouselondon.co.uk/lot/lower-ground-floor-flat-301-shirland-road-maida-vale-london-w9-3jl-275931
