A significant leasehold reform has come into effect, providing leaseholders in West London and across the UK with greater flexibility in managing their properties.
What’s Changed?
Previously, under the Leasehold Reform, Housing and Urban Development Act 1993, leaseholders had to have been the registered owner of their property for a minimum of two years before they could extend their lease. Alternatively, they could take on additional legal and professional costs by obtaining a formal assignment from a seller.
However, in a move aimed at simplifying the process and reducing costs, Minister for Housing and Planning, Matthew Pennycook has signed regulations removing the two-year ownership rule for both flats and houses.
The Benefits for Leaseholders
This reform is a positive step for property owners, particularly those who have recently purchased leasehold properties. With immediate effect, leaseholders can now extend their lease or buy the freehold of their property without waiting.
This change offers leaseholders greater freedom and removes hurdles to securing long-term ownership of their homes. With the two-year waiting period removed, new property owners can take action immediately, making it easier for those navigating mortgage conditions or tight financial timelines.
For sellers, this could also make leasehold properties more attractive to buyers who were previously deterred by the restrictive rules around lease extensions.
A Note of Caution: The Registration Gap
While the reform is widely welcomed, there is a potential complication that leaseholders should be aware of: the ‘registration gap.’
Due to significant delays at the Land Registry, there can be a lag between purchasing a leasehold property and being officially registered as the legal owner. During this period, buyers hold the property in equity only, which can create issues when serving notices or making legal claims. Although the two-year rule has been removed, leaseholders awaiting official registration may still encounter difficulties when trying to exercise their rights.
The ongoing delays at the Land Registry remain a challenge, and addressing these backlogs is crucial to ensuring leaseholders can fully take advantage of this reform.
Looking Ahead: Further Leasehold Reforms
The removal of the two-year rule is the first in a series of anticipated leasehold reforms. Later this year, the government is expected to introduce the draft Leasehold and Commonhold Reform Bill, which could bring further changes, including a push towards commonhold ownership as an alternative to leasehold.
Additionally, a further government consultation on enfranchisement valuation rates is expected, potentially impacting the costs involved in extending leases and purchasing freeholds.
Additional Considerations for Leaseholders
Beyond the immediate benefits, leaseholders should be mindful of ongoing reforms shaping the property landscape. The Leasehold and Freehold Reform Act 2024 (LAFRA) not only removes the two-year rule but is also expected to introduce fairer ground rent provisions and greater transparency in leasehold dealings.
However, delays at the Land Registry continue to pose challenges. Given the backlog in registering property transactions, new owners may still face hurdles when seeking to extend their lease or purchase the freehold.
Ensuring early legal advice and proactively managing property registration can help mitigate these issues.
Experts warn that while the rule change removes a bureaucratic barrier, the efficiency of implementation will depend on wider systemic improvements.
Impact on West London Property Owners
For property owners considering selling, this change could make leasehold properties more appealing to buyers who now have the freedom to extend their lease immediately. For leaseholders, it removes a long-standing barrier, making it easier to secure their property’s long-term value.
However, patience may still be required due to registration delays. If you’re considering a lease extension or freehold purchase, seeking professional advice remains essential to navigating this evolving landscape.
Leasehold reforms
Beyond the removal of the two-year ownership rule, further leasehold reforms are on the horizon. A draft Leasehold and Commonhold Reform Bill is expected later this year, which may introduce commonhold as an alternative to leasehold and review valuation rates for enfranchisement. These ongoing changes aim to modernise the leasehold system, making it more transparent and fair for property owners.
Staying informed about these changes is crucial for both current and prospective leaseholders to make well-informed decisions regarding their property investments.
At Horton and Garton, we are committed to keeping our clients updated on legislative changes that impact property ownership in West London. Our team is ready to provide expert guidance to help you navigate this evolving landscape.
