Matthew Pennycook’s recent ministerial statement, made on 21 November 2024, confirmed the Government’s plans regarding the implementation of the Leasehold and Freehold Reform Act 2024 (‘LAFRA’). The statement recognised the need to ‘balance speed with care’ and also, that whilst the Government intends to ‘work at pace’ it will also ‘take time to ensure the reforms we pass are fit for purpose.’
All of this underpinned by the recognition that there are significant steps that need to be taken before any of the ‘meatier’ provisions of LAFRA can be brought into force.
However, we do have one assurance about a ‘quick win’ for leaseholders. The statement promised that:
“We intend to commence the Act’s provision to remove the ‘2-year rule’ in January next year. This will mean that leaseholders will no longer have to wait two years after purchasing their property before exercising rights to extend their lease or buy their freehold…”
This refers to the proposed implementation of Section 27 of LAFRA which will remove the two-year ownership rule that applies before a leaseholder can qualify for the statutory right of lease extension under the 1993 Act, or the right to buy the freehold to a long leasehold house under the 1967 Act.
Although we will have to wait some significant time for any of the valuation changes to come into force, this implementation has been promised as an early new year present to leaseholders and will at least mean that, where a flat is being purchased, the buyer will not have to necessarily insist that the seller serves a Section 42 Notice and that this is assigned to them. Instead, they will be able to initiate the claim at a time of their choosing. It’s not completely straightforward however; if a lease needs to be extended because of mortgage conditions (e.g. the lease is under 80 years or of a length that is not acceptable because it is shorter) then the issue of needing a longer lease at completion will not go away, and the only immediate solution in such cases will be a voluntary extension. In other cases, I anticipate that mortgage lenders may include conditions such as that the new owner of the property will have to initiate a claim to a lease extension within a certain specified period of completion taking place.
For those looking to buy the freehold to their qualifying long leasehold house (the lease must be a fully repairing lease of the whole – inside and out) this will also mean that those having recently purchased will not need to wait two years before initiating a claim to buy the freehold. This could be good news for anyone who has purchased in a new-build development and wants to proceed right away to buy the freehold.
All of this will have to be tempered with the fact that the valuation reforms are some significant way off. Therefore, whilst this may resolve matters for buyers who don’t have to wait to start a claim and won’t necessarily have to ask the seller to initiate the process for them, any more significant changes to what the leaseholder is likely to pay will have to wait for these further reforms to come to pass. On any analysis (and my best guess) this is likely to be some 12-18 months on from the middle of 2025.
We currently don’t have sight of any draft commencement provisions, and so these provisions are not yet in force, but we can anticipate some news on these timescales either as an early Christmas present or perhaps in the early part of the new year.
Watch this space for further developments.
16th December 2024
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The above is accurate as at 16 December 2024. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
