Leasehold changes to be aware of

The last Conservative government decided back in 2023 to introduce a bill that would make the leasehold system fairer. And following consultations, in May last year, the Leasehold and Freehold Reform Act 2024 became law with changes which were supposed to include:

• The requirement for leaseholders to have owned their property for at least two years before they can extend the lease or buy the freehold will be scrapped
• Standard lease extension terms increased to 990 years, giving leaseholders much more secure ownership
• Leaseholders were given a new legal right to buy out the ground rent without having to extend the lease at the same time
• It became cheaper and easier for leaseholders to take over the running and management of their building
• Freeholders who manage their building directly would be required to belong to a redress scheme
• Buying or selling a leasehold property would be made quicker and easier by setting deadlines for leasehold packs to be produced and capping their cost
• A maximum time limit would be set for freeholders to supply the information required when a property is bought or sold
• The sale of new leasehold houses would be banned (other than in exceptional circumstances).

However, none of the changes were immediately implemented and the then Conservative government suggested this would happen in stages through 2025 and 2026.

As such, the first change has only just come into force, with Housing Minister Matthew Pennycook signing off on regulations at the end of January to remove the two-year ownership rule. This means that leaseholders can now extend their lease or buy the freehold once they’ve purchased a leasehold property, without having to wait two years.

However, in practice you can’t take any action until you are formally registered as the owner of the property at the Land Registry, so there will be an unavoidable delay after purchase. The length of that delay will depend on how long it takes for the Land Registry to process your application.

Although there is still some way to go until leasehold has been fully reformed as per the Act, this is at least a first step and means that buyers should be able to increase the value of a property with a short remaining lease much sooner after completing the purchase.

As an investor, that might then allow you to refinance, meaning you may be able to:

• Get a new loan on a previously unmortgageable property
• Reduce the LTV of your existing mortgage
• Withdraw some equity if that makes sense

With any property you own, it’s important to protect your investment, and being properly insured is a key step. For leasehold properties, buildings insurance is usually arranged and put in place by the management company or freeholder, and your service charge payment then includes your share of the insurance premium.

But if you are renting a property, you need to check that any blanket building policy gives you an appropriate level of protection, and you will almost certainly need to consider taking out your own landlord insurance to cover you for certain letting-related events that might arise. For more information and advice on this, see our article, ‘What landlords need to know about buildings insurance for leasehold properties’.

If you would like to discuss insuring a leasehold property, you can get in touch with our experts by calling 01903 890044 or emailing info@bodeinsurancesolutions.co.uk . And you can easily get a quote online at any time via our website.

If you are a current landlord with any of the agencies in Leaders Romans Group, an insurance quote is ready and waiting for you in your online landlord account. No fuss or forms to fill out!

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