Updates to the Leasehold and Freehold Reform Act and what they mean

Updates to the Leasehold and Freehold Reform Act – and why it matters

There have been more developments in the law earlier this year, as more parts of the Freehold and Leaseholder Reform Act 2024 are enacted.

What does ‘enacted’ mean?

 ‘Enactment’ refers to the process of making a law or legislation, meaning a bill has been approved and formally declared law. 

In the UK, this involves a bill passing through both the House of Commons and the House of Lords, receiving Royal Assent (approval by the monarch), and then becoming an Act of Parliament.

Once a bill is enacted, it becomes an Act of Parliament, which is a law that has been passed by Parliament. Once an Act is passed, the government is responsible for bringing it into force and implementing it. 

A reminder of the Freehold and Leaseholder Reform Act 2024:

The Leasehold and Freehold Reform Act 2024 was passed into law late last year, and overturned The Leasehold and Freehold Reform Bill. The Act aimed to improve leasehold rights and protections.

What were the key changes in the Act?

Abolition of the two-year ownership rule: Leaseholders no longer need to wait two years before extending their lease or purchasing the freehold.

Lease extensions to 990 years: Residential leaseholders can now extend their leases to 990 years (previously 90 years for flats and 50 years for houses) with no ground rent.

Fairer leasehold costs: Reforming valuation methods to make it cheaper to buy the freehold or extend leases, including removing ‘marriage value’ (an additional cost paid to freeholders).

Stronger rights for leaseholders: Making it easier for leaseholders to take control of building management through the Right to Manage (RTM) process.

Reforms to service charges & transparency: Leaseholders will have more rights to challenge unfair service charges and demand clearer cost breakdowns.

Ban on new leasehold houses: Most new-build houses will have to be sold as freehold, preventing unfair leasehold practices.

What this means for leaseholders:

More affordable lease extensions & freehold purchases: Reducing costs associated with leasehold ownership.

Greater control over properties: Easier pathways to managing buildings and challenging unfair charges.

 Abolishing unfair practices: The Act aims to put an end to exploitative leasehold arrangements, benefiting millions of homeowners.

Right to Manage

The government has recently announced key changes to Right to Manage (RTM) rules under the Leasehold and Freehold Reform Act 2024, expanding eligibility for more buildings.

The Act now allows buildings with up to 50% commercial space to qualify for a Right to Manage (RTM) claim (previously 25%) and removes the requirement for leaseholders to cover freeholders' legal costs during RTM claims. 

Here's a more detailed breakdown of the changes:

Increased non-residential threshold:

The Act increases the non-residential (commercial) floor space threshold for Right to Manage claims from 25% to 50%. This means more mixed-use buildings can now qualify for RTM. 

Freeholder costs:

Leaseholders are no longer required to cover the legal fees of their freeholder when making a Right to Manage claim. 

Implementation Date:

The changes to the Right to Manage provisions came into force on March 3, 2025. 

What is a Right to Manage (RTM) claim?

A Right to Manage (RTM) claim is a legal process that allows leaseholders of flats to take over the management of their building from the freeholder - without having to prove any fault or mismanagement.

It was introduced under the Commonhold and Leasehold Reform Act 2002 and gives leaseholders more control over how their building is run, including decisions about maintenance, repairs, insurance, and service charges.

Key points about an RTM claim:

• Leaseholders form an RTM company to take over management.
• They don't need the freeholder’s consent.
• There are certain eligibility criteria - e.g., at least two-thirds of the flats must be leasehold, and at least half of the leaseholders must want to participate.
• Until recently, there was a rule limiting mixed-use buildings (with shops or offices) if commercial space was over 25% - but from March 2025, this will rise to 50%.
• Leaseholders will also no longer have to pay the freeholder's legal costs when making an RTM claim from March 2025.

Implications for Leaseholders:

These reforms aim to make the leasehold system more equitable and transparent. By broadening RTM eligibility and alleviating associated costs, leaseholders gain greater autonomy over property management decisions, potentially leading to more responsive and tailored management practices. The adjustments to legal processes and cost.

Get Expert Legal Advice

If you are a leaseholder, and seek professional advice on your properties, please contact Nick Leedham, Partner and Head of Residential Leasehold at Coles Miller Solicitors.