For those who own a leasehold flat—or are thinking about buying one—the landscape is shifting. With several government announcements and proposals in recent months, understanding leasehold reform can feel like navigating a maze. But change is coming, and much of it could work in your favour.
At Winkworth, we’ve broken down the key proposals and updates to help clarify what’s changing, when you might see those changes, and what they could mean for you as a current or prospective leaseholder.
Making Lease Extensions and Freehold Purchases “Cheaper and Easier”
Extending your lease or buying your freehold has traditionally been a complex and costly process. New legislation introduced in the Leasehold and Freehold Reform Act 2024 aims to simplify and reduce the expense of these procedures.
Key reforms include:
- Abolition of Marriage Value: Currently, if your lease falls below 80 years, its value drops significantly due to something called "Marriage Value"—a cost that can dramatically increase what you pay to extend. This is set to be scrapped under the new reforms.
- Ground Rent Cap (For Extension Calculations Only): Ground rent will be capped at 0.1% of your property's value for the purposes of calculating lease extension or freehold purchase costs. For example, a flat valued at £250,000 will see ground rent capped at £250 annually.
- Freeholders to Cover Their Own Legal Costs: Under the new regime, leaseholders will no longer be expected to foot the bill for their freeholder’s legal and valuation costs when extending a lease—offering significant potential savings.
- Simplified Valuation Calculations: Currently, lease extension values are negotiated between surveyors, often leading to disputes. Reforms aim to streamline the process with more fixed calculation methods—though this could occasionally lead to higher costs for those with leases above 80 years or with very low ground rents.
- Longer Lease Terms: Standard lease extensions will go from 90 years to 990 years. While this sounds impressive, the practical impact is limited, as 90-year extensions already effectively cover most leaseholders for life.
- No Ownership Wait Time: As of January 2024, leaseholders no longer need to wait two years before applying for a lease extension—welcome news for recent buyers.
Making Flat Ownership Fairer
Alongside financial improvements, the new laws aim to level the playing field between leaseholders and freeholders—especially when it comes to building management and service charges.
Key changes include:
- Right to Manage: Leaseholders will now find it easier and cheaper to take over the management of their block. This could mean appointing a new managing agent or forming a resident-controlled company. These updates came into effect in March 2024.
- Transparent Billing: Bills for service charges and other fees must now follow a standardised format, making it easier to challenge or question costs.
- Fairer Legal Costs: Leaseholders will no longer automatically be responsible for paying a freeholder’s legal fees when disputing charges—lowering the risk of seeking redress.
- Ban on Hidden Fees: Opaque commissions and other hidden costs paid to freeholders and managing agents are set to be outlawed.
The Rise of Commonhold
Beyond leasehold reform, the government is moving towards Commonhold—a form of ownership where residents jointly manage their block, removing the need for an external freeholder.
Commonhold will become the default structure for all new flats under new proposals from the Labour Government.
Existing leaseholders won’t be automatically converted but will have the opportunity to switch via a formal process, likely similar to current freehold purchase rules.
When Will These Changes Happen?
The Leasehold and Freehold Reform Act 2024, introduced by the previous Conservative Government, has already passed and should start to take effect over the next two to three years—though full implementation may take longer.
The more ambitious Leasehold and Commonhold Bill, currently being introduced by the Labour Government, is in its early stages and is likely to progress gradually over the course of this Parliament.
Final Thoughts from Winkworth
Leasehold reform promises to reshape the experience of owning a flat in England and Wales. While many of the changes will take time to come into effect, they represent a significant step forward in empowering leaseholders, reducing costs, and increasing transparency.
If you're unsure about how these changes might affect your property or a potential purchase, speak to your local Winkworth office. We're here to help guide you through every stage of the property journey—with clarity, confidence and expert advice.
Sources: LondonLovesProperty
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