The Latest on Leasehold Reform – What Conveyancers Need to Know

The English Leasehold system has gone through some big changes in the last year – and there are more reforms on the way. With the Leasehold & Freehold Reform Act 2024 now law, this is to be expected – but the pace of change is slow. Some actions have been taken, whilst others are waiting for further regulation or facing legal challenges.

For conveyancers, this creates a tricky landscape. Clients want clear answers on their rights, but the mix of new rules and proposals brings the risk of unclear advice, disputes, and even claims. Here’s a roundup of what’s changed, what to look out for, and why indemnity insurance policies – like those we offer at Prosperity Insurance – are an effective safeguard.

What’s in place

The following changes have taken place in the last year, and are now in force:No more “two-year rule”

Leaseholders no longer have to own their property for two years before they can extend their lease or buy the freehold.

Wider Right to Manage (RTM)

Buildings with up to 50% commercial space can qualify for RTM (previously the limit was 25%). This makes RTM available to more properties within mixed-use blocks.

Lower costs for leaseholders

In many RTM claims, leaseholders no longer have to cover the freeholder’s legal costs.

Service charge transparency

New rules are starting to standardise service charge paperwork and make it easier for leaseholders to challenge unfair charges. Annual reports and clearer demands will be expected as part of this.

What’s still to come

There are also a few changes mentioned in the initial legislation that require further legislation before they can be passed. These include:

Lease extensions to 990 years

The promise of standard 990-year extensions with peppercorn ground rent is in the Act, but it won’t start until secondary legislation is passed.

End of “marriage value”

The plan to abolish the marriage value (the extra cost if a lease has under 80 years left) is being challenged in court. Timing and outcome are uncertain.

And as well as these, the following issues are currently under consultation to help inform any future legislation to be passed:

• The regulation of managing agents.
• The banning of new leasehold houses and flats.
• Reviving commonhold.

The importance of indemnity policies

Darren Parfitt, Business Development Manager at Prosperity Insurance, commented on the reforms:

“With the complex landscape of legislative change underway, clients and their solicitors need a quick and simple way to mitigate against the risks it presents. One such way is through taking out indemnity insurance. Even with reforms underway, disputes over service charges, RTM claims, or ground rent liabilities can surface unexpectedly – particularly when legislation is only partly in force or still under challenge.

Indemnity policies provide a safety net, protecting both clients and their advisers from the financial and legal fallout of these risks. Until the reforms settle into clear, consistent practice, indemnity cover remains a valuable tool to give clients greater confidence in their transactions.”

Find out more about Prosperity’s conveyancing indemnities or, if you’d like to speak to the team, you can get in touch.