When the Leasehold and Reform Act (LFRA) 2024 received Royal assent towards the end of May, it marked a milestone. It was the last Bill to be passed in the current parliament, as part of the final flurry of business or ‘wash up’ ahead of the general election – and not everyone had expected it to be included at all. If anything, some thought the election would hinder its progress.
We should stress, however, that most of its provisions will only come into effect with secondary legislation, a job which now falls to whoever forms the next government. So all its provisions have yet to come into force, although it was published on June 3. To date, there is little clarity around when exactly this secondary legislation will come in.
What are its key reforms?
The Act affects property (including houses and flats) across England and Wales. Its aim is to significantly increase residential long leaseholders’ rights, while introducing new ones. The idea is that it will become easier, cheaper and fairer for leaseholders to extend their leases or purchase their freeholds.
- Long residential leases for houses are banned unless a permitted exception is granted – there are very few of these.
- Leaseholders will have more rights when it comes to service and admin charges, insurance and the way sales information is provided. At the same time, liability for litigation charges is reduced.
- Changes to the law around leasehold extensions and enfranchisement for houses and flats, plus extended Right-to-Manage (RTM) rights. These include:
- Upping the standard lease extension term by 90 years for flats, 50 for houses, to 990 years, with only a nominal ‘peppercorn’ ground rent.
- Ending the rule that you have to have owned a property for two years before you can buy the freehold or extend the lease. New leaseholders will be able to take action immediately.
- Leaseholders will be permitted to take on the management of a site or purchase its freehold if half of the floor space is non-residential – previously, the limit in mixed-use buildings was 25%.
- Estate management fees are regulated to give residential leaseholders and freeholders broadly the same protections. Equally, estate management firms and landlords must now sign up to a compulsory redress scheme.
- The Act additionally regulates remedies for rent-charge arrears in a way that hasn’t been possible since the 1970s.
- ‘Marriage value’, i.e. the rise in a property’s value after a lease extension is completed, to reflect the higher market worth of the longer lease, is abolished by the LFRA.
Service charges
Amending the Landlord and Tenant Act 1985, the LFRA makes alterations to service charge costs although, again, these aren’t yet in force. They include:
- Payment demands need to come in a specified form, with particular information given in a specific way.
- Landlords will have to provide service charge accounts in a specific way, with receipts and invoices. They will need to produce this no later than six months after year end, while a qualified accountant will need to provide a written report.
- Landlords will have to supply an annual report about service charges for leaseholders, within six months of each year end.
- Leaseholders will be entitled to request (and receive) information from their landlord about service charges or indeed anything else.
- They will also have new rights to apply to the Tribunal if service charges are not requested in line with the new rules, or the annual report is not supplied. The Tribunal has the power to impose damages for failings, to a maximum of £5,000.
There are other stipulations concerning administration, insurance and litigation costs. Finally, any landlord who receives a sales information request must provide the leaseholder with any of the information asked for if they have it.
Changes to the Building Safety Act
The LFRA makes changes to sections 123 (dealing with remediation orders) and 124 (dealing with remediation contribution orders) of the Building Safety Act.
With the former, the Tribunal will be able to order a landlord to provide an expert report or survey to do with relevant defects and how to put them right.
With the latter, the LFRA expands section 124 to incorporate examples of costs which any remediation contribution order could include, from expert reports to temporary accommodation costs and those of ‘relevant steps’ such as avoiding or reducing harm which might result from an incident such as fire or building collapse.
What it doesn’t say
Conspicuous through its absence is the proposal to phase out ground rent for those who are current leaseholders, or to cap it at £250 annually. This would be something for a new government to take up, should they wish to do so.
Oakfield says
As mentioned above, it remains unclear when the Act’s provisions will come into effect. It’s also worth remembering that a future government could potentially pass additional primary legislation, or partly or fully repeal the Act, according to its commitments and priorities. So no one has a crystal ball or can predict exactly what will happen following the election.
However, we welcome what the Act lays out, and the way it makes things fairer and more transparent for the UK’s millions of leaseholders. What’s more, we’re ideally placed to take leaseholders, building owners, management companies and landlords through the various changes so that they remain compliant with the law at all times.
Based in East Sussex, we work with tenants, landlords and management companies across our area. We have offices in Eastbourne, Hastings, Bexhill, Lewes, Uckfield and Heathfield. Not only do we love our part of the world, we’ve been based here since the mid-1990s and know it, and the local property market, very well indeed. So we’ll very gladly discuss the LFRA and indeed any aspect of renting, letting out or block management.
Get in touch today and have an informal chat to the friendly, expert team. We can take things from there. Find our contact details here.