The UK government has announced a significant step forward in leasehold reform, a move that will directly impact landlords and leaseholders alike. Housing Minister Matthew Pennycook has signed regulations that remove the two-year ownership rule for leaseholders seeking to extend their lease or buy their freehold. This update, is in effect from 31st January and is expected to provide greater flexibility and cost savings for leaseholders.
Key Changes Under the Leasehold and Freehold Reform Act
- Immediate Right to Extend or Buy: Leaseholders will no longer need to wait two years before applying to extend their lease or purchase their freehold. This means that as soon as a leaseholder acquires a property, they can take action immediately.
- Potential Impact on Property Transactions: The reform may influence the buying and selling of leasehold properties, as prospective buyers will now have the ability to extend or enfranchise their lease upon purchase, making these properties more attractive.
- Reduction in Costs for Leaseholders: By removing this waiting period, leaseholders could save money by avoiding potential price increases during those two years.
Concerns Raised by the National Leasehold Campaign (NLC)
While this change is a positive step, the National Leasehold Campaign (NLC) has emphasized that there is still work to be done. Many leaseholders remain in what they describe as ‘leasehold limbo’, as the valuation section of the Leasehold and Freehold Reform Act (LAFRA) 2024 has yet to be activated. Without this crucial component, many leaseholders are still burdened with excessive premiums and legal fees to extend their lease or purchase their freehold.
The NLC is urging the government to fast-track the valuation reforms, which would make it easier and more affordable for leaseholders to take control of their property. Until this happens, leaseholders remain subject to freeholders who, in some cases, impose inflated charges and fees.
Implications for Landlords
For landlords who own leasehold properties or manage them on behalf of investors, these changes could have several implications:
- Increased Lease Extension Requests: Expect to see a rise in leaseholders looking to extend their leases sooner rather than later.
- Market Shifts: Leasehold properties could become more attractive to buyers, leading to shifts in pricing and demand.
- Potential Challenges in Leasehold Investments: With further reforms anticipated, landlords with leasehold portfolios should prepare for additional changes
What Should Landlords Do Next?
- Stay Informed: Keep up to date with further government announcements regarding leasehold reform.
- Prepare for Increased Leasehold Activity: Be ready for more leaseholders seeking to extend or purchase their freeholds.
- Assess Leasehold Portfolios: If you own leasehold properties, now is a good time to review your investments and consider how upcoming reforms might impact their value.
- Engage with Legal Experts: With more reforms expected, landlords should consult property law professionals to understand their rights and obligations.
Conclusion
The removal of the two-year ownership rule is a welcome change that will benefit many leaseholders, but there is still progress to be made. Landlords should stay proactive and prepared as further reforms take shape. The landscape of leasehold property ownership is evolving, and staying ahead of these changes will be key to managing investments effectively.
