Leasehold Reforms Face Further Delays: What It Means for Homeowners and Investors
The government’s leasehold reform efforts have hit another roadblock, frustrating campaigners and leaseholders alike. While the Leasehold and Freehold Reform Act 2024, passed under the previous government, was intended to simplify and improve the system, little progress has been made under the current Labour Government.
Six months since the Act’s passing, Housing Minister Matthew Pennycook has signalled that further consultations and legislative fixes are necessary, adding uncertainty for the estimated hundreds of thousands of leaseholders awaiting changes to the leasehold system.
Key Changes Promised – But Delayed
While the government plans to implement the following changes, timelines remain unclear:
- Removal of the Two-Year Rule (January 2025): Leaseholders will no longer need to wait two years after purchasing their property to extend their lease or buy the freehold. However, as Linz Darlington of Homehold points out, this change has limited benefit, as sellers can currently pass on lease extension rights to buyers.
- Expanded Right to Manage (Spring 2025): New provisions aim to reform costs and voting rights, making it easier for leaseholders to take control of their properties.
- Longer Lease Extensions and Valuation Reforms: Proposed measures such as extending lease terms to 990 years and removing freeholders’ legal cost requirements remain on hold pending further legislation.
Consultations and Legal Challenges
A major stumbling block is the need for new consultations, including one on valuation rates, delayed until summer 2025. These rates will determine whether extending leases becomes more affordable, leaving leaseholders in limbo. Meanwhile, legal challenges from freeholders, who argue the reforms infringe on their rights, have further slowed progress.
Pennycook has defended the delays, citing “serious flaws” in the 2024 Act and emphasising the need for careful planning to avoid repeating past mistakes. However, campaigners argue the government could immediately implement uncontentious changes while working on longer-term fixes.
Frustration Grows Among Leaseholders
The delays have left many leaseholders unable to sell or remortgage their properties, undermining the government’s promise to make homeownership fairer and more accessible. The National Leasehold Campaign has warned that further delays or a dilution of reforms will damage trust in the government.
Darlington criticised the lack of urgency, stating that leaseholders are missing out on “easier-to-implement benefits,” such as cheaper lease extensions and a cap on freeholders’ legal fees. He suggested the government might be waiting for the outcome of the freeholders’ legal challenges before moving forward.
What This Means for Property Investors
The continued uncertainty surrounding leasehold reform creates challenges for investors. Key points to consider include:
- Delays in Lease Extension Savings: Investors holding leasehold properties may face higher costs for extending leases until reforms are finalised.
- Market Stagnation: Properties with short leases may remain difficult to sell, limiting liquidity in certain segments of the market.
- Future Opportunities: Once reforms are implemented, the changes could make leasehold properties more attractive, particularly in areas with high concentrations of flats.
Regulation of Managing Agents
In a related announcement, the government plans to revisit Lord Best’s 2019 report on regulating property agents, potentially introducing minimum qualifications for managing agents. While details remain vague, such reforms could professionalise the sector and improve consumer protections.
Next Steps for Leaseholders and Investors
The government’s timeline for implementing leasehold reforms remains uncertain, with consultations likely extending into late 2025. Leaseholders and investors should:
- Monitor updates from the government and campaign groups.
- Seek professional advice if considering lease extensions or property purchases.
- Plan for potential delays in reforms when evaluating property investments.
At LetsInvest, we’re here to help you navigate the complexities of the property market. Whether you’re looking to acquire leasehold properties or manage existing assets, our team can provide tailored support to ensure your portfolio remains resilient in an evolving landscape.
