Leasehold properties have come under a lot of scrutiny in recent years due to legal and financial ramifications for leaseholders. These include unfair lease terms, spiralling ground rents, high service charges, unsafe buildings, a lack of control over the property owned and more.
Millions of homeowners in the UK are leaseholders and, with these issues becoming increasingly controversial, there have been calls for reform. As a result, the Leasehold and Freehold Reform Act 2024 came into effect in May 2024.
While many of the reforms detailed in the Act are yet to come into force, a significant one came into effect on 31st January 2025 — the removal of the two-year ownership rule.
The abolishment of the two-year ownership rule
Under the two-year rule, leaseholders had to own their property for 2 years before being able to extend their lease or buy the freehold of the property. Alternatively, a leaseholder could ask the seller to assign their right to them on completion to avoid the 2-year waiting period. However, this was a complicated process and an additional expense.
As of 31st January 2025, however, leaseholders can now begin the lease extension or freehold purchase process without having to wait for 2 years after buying the property. This makes it a quicker and easier process. It also means leaseholders can decide when to do this in their own time rather than being under pressure to either choose the enfranchisement route upon purchasing the property or wait for 2 years. As a retrospective change, it benefits existing leaseholders as well as those who sign new leases from now on.
What changes are already in place?
In July 2024, regulations came into effect that addressed the recovery of legal costs via service charges, rent charge arrears and the repeal of Section 125 of the Building Safety Act 2022. More stringent insolvency notifications were also introduced for higher-risk buildings.
In October 2024, elements of the Building Safety Act 2022 were improved. These focused on the remediation of building defects, the issuance of contribution and remediation orders and more clarity on the interpretation of key terms so that the application of them remains consistent.
The next leasehold reform provisions to come into effect
Provisions in the Act for the Right to Manage are to be implemented in spring. This means that more leaseholders in mixed-use buildings will be able to claim the Right to Manage, assuming control of the management instead of the freeholders. The non-residential limit will be increased so that leaseholders in buildings with a non-residential floor space of up to 50% will qualify for the Right to Manage. As well as that, when making a claim for the Right to Manage, leaseholders will no longer have to pay the legal costs of their freeholders.
Arrange your leasehold property mortgage
If you’re thinking about buying a leasehold property and want to know what mortgage options are available to you, just give us a call on 01322 907 000. Our mortgage brokers can check your financial situation and search for the mortgage deals best suited to your needs.
Providing you with impartial advice, you can compare the deals and make an informed decision on your mortgage. At Trinity Finance, we also offer other home-buying services, such as arranging your leasehold home insurance and mortgage protection insurance.