Leasehold and Freehold Reform Act 2024

Introduction

In this first session we will be looking at the Leasehold and Freehold Reform Act 2024, which was passed in May 2024, the aim being to overhaul leasehold property law in England and Wales. A wide range of measures were included in the legislation including changes to a number of areas. You will be pleased to know that we are not going to go through all of these and I will instead be running through the key reforms to leasehold law as well as the recent High Court challenge to the legislation. In the second session Kate will be looking at the changes to the recovery of service charges and I will explain how the Government plans to reinvigorate commonhold. Then in the afternoon Kate will also be looking at the Renters Reform Act.

Leasehold property ownership

Before we dive into the legislation it may be useful to provide an overview of leasehold property ownership in England and Wales and residential property in particular. Typically, houses are mainly owned as freeholds and flats are leasehold. Leasehold ownership means that the person owns the right to occupy a property (usually a flat) for a fixed period under a lease agreement, while the land and building are owned by a separate freeholder.

Leaseholders typically pay:

• A premium for the grant of a lease

• Ground rent

• Service charges

• Maintenance and other fees

Leases include a range of restrictions on how the property can be used, alterations and subletting. If the leaseholder breaches these restrictions then the freeholder may have the right to forfeit (i.e. to terminate the lease).

Statutory intervention

We are all used to a lot of complex legislation in this area and in fact the earliest intervention in residential leasehold property was the Increase of Rent and Mortgage Interest (War Restrictions) Act 1915. The legislation was introduced during the First World War to address the housing shortage and to prevent landlords from exploiting tenants by raising rents excessively or evicting them unfairly. It marked a significant shift from purely contractual landlord-tenant relationships to statutory protections for tenants.

This Act laid the foundation for future housing legislation and was the first comprehensive European enactment controlling rent. It was followed by many other reforms throughout the 20th century, including the Leasehold Reform Act 1967, which allowed long-term leaseholders of houses to acquire their freehold.

The next major piece of legislation was in 1993 with the Leasehold Reform, Housing and Urban Development Act 1993. This grants leaseholders rights to extend leases and collectively purchase the freehold of their buildings. Individual leaseholders of flats with leases over 21 years in length have the right to extend their lease by 90 years at a peppercorn rent. Additionally, qualifying leaseholders of flats can act together to buy the freehold of their building. This process involves appointing a nominee purchaser and serving an initial notice to the freeholder. The price is determined either by agreement or via a tribunal if disputed. Each process contains complex rules about residence conditions, low rent thresholds, and excluded premises.

Since then however, there have been calls for Parliament and successive governments to go much further and this has culminated in the Leasehold and Freehold Reform Act 2024.

Key reforms in LAFRA 2024

Key reforms include:

• Ban on the grant of long residential leases of houses unless a permitted exception.

• Major changes to enfranchisement and lease extension procedures.

• Simplification of Right to Manage (RTM) and increased transparency around service charges.

Leasehold houses

The Act prohibits the granting or entering into an agreement to grant a long residential lease of a house unless the lease is a “permitted lease.”

Extensive definitions specify what is meant by a long residential lease of a house. At its simplest, it is a lease for a term of more than 21 years of a separate set of premises constructed or adapted for use as a dwelling, which can be occupied under the lease as a separate dwelling.

A permitted lease is one that falls into one or more statutory categories. Some require a permitted lease certificate from a tribunal; others can be self-certified.

Transaction warning conditions must be followed before an agreement to grant a permitted lease is exchanged.

If the prescribed statement is omitted from a new lease, the Land Registry must enter a restriction preventing registration of dealings with the lease.

Permitted lease categories include:

• Leases granted out of pre-22 December 2017 superior leases.

• Leases granted under pre-22 December 2017 agreements for lease.

• Retirement leases and shared ownership leases (subject to conditions).

If the prohibition is breached, the tenant (or in some cases the mortgagee) is entitled to acquire the freehold for no consideration.

Local authorities will enforce the ban, and financial penalties may be imposed (£500–£30,000).

Leasehold enfranchisement and lease extensions

The Act introduces several major reforms intended to simplify and reduce the cost of enfranchisement. Highlights include:

Removal of the two-year ownership requirement

From 31 January 2025, tenants of houses and flats may bring an enfranchisement or lease extension claim immediately on acquiring their lease.

Removal of restrictions on repeat claims

The 12-month bar on repeat claims is removed.

Increased non-residential limit

Mixed-use buildings may qualify for collective enfranchisement where commercial space does not exceed 50% of internal floor area (previously 25%).

Right to longer leases

Qualifying tenants will receive a new lease term equal to the unexpired term plus 990 years.

Valuation changes

• Marriage value and hope value abolished.

• Ground rent for valuation capped at 0.1% of freehold vacant possession value.

• Standardised valuation method introduced.

Landlord’s costs

Each party generally bears its own costs except where a tribunal orders otherwise.

Other rights

Peppercorn ground rent for very long leases

Tenants with 150+ years remaining may vary their lease to reduce ground rent to a peppercorn on payment of a valuation-based premium.

Right to Manage—expanded eligibility

From 3 March 2025, mixed-use buildings with up to 50% commercial use may claim RTM.

The Legal Challenge

A coalition of nine major freeholders—including Cadogan, Grosvenor, Long Harbour, and others—brought a judicial review, arguing breach of Article 1 Protocol 1 ECHR (peaceful enjoyment of possessions). Estimated losses ranged from £289m–£404m.

The Government argued the legislation served the public interest and pursued social and economic reform.

Judgment

On 24 October, the High Court issued a 164-page judgment dismissing the challenge. It held:

• Parliament acted within its wide margin of appreciation on social and economic policy.

• Measures pursued legitimate aims, including correcting inherent unfairness in leasehold.

• Reforms struck a fair balance between public and private interests.

• Charities were not entitled to special exemption.

If no appeal is lodged, enabling legislation may follow in 2026–27.

Session 2

Commonhold – The Future of Multi-Unit Property Ownership

Introduction

This section focuses on commonhold—a form of ownership allowing flat owners to hold the freehold of their unit indefinitely, with shared areas collectively managed by a Commonhold Association.

What is Commonhold?

Created by the Commonhold and Leasehold Reform Act 2002, commonhold removes the landlord–tenant relationship. Each owner is a member of a company limited by guarantee (the Commonhold Association), which manages the building.

Challenges and Barriers

Commonhold uptake has been extremely limited due to:

• Unanimous consent required for conversion.

• Freeholder refusal, forcing leaseholders to enfranchise.

• Mortgage lender hesitation due to unfamiliarity.

• Legal complexity for mixed-use buildings.

• Governance risks (e.g., insolvency of the association).

• Low market awareness — fewer than 20 schemes exist.

Reforms and the Future

Although Government aims to make commonhold the default tenure for new flats, reforms are still being developed.

The Law Commission’s 2020 report Reinvigorating Commonhold recommends:

Greater flexibility

• Mixed-use suitability.

• Phased development.

Simplified conversion

• Reduce consent threshold to 50%.

Improved governance

• Powers to replace directors.

• Stronger enforcement mechanisms.

Standardised legal framework

• Prescribed Commonhold Community Statement.

• Optional local rules.

Protections for lenders

• Improved solvency safeguards.

• Clearer governance through Companies House filings (often as micro-entities).

• Reserve funds held on trust.

• Mandatory public liability insurance.

• Limits on liquidators’ ability to demand further contributions from unit owners.

A draft Leasehold and Commonhold Reform Bill is expected late 2025.

November 2025
Mark Routley
Partner, TLT LLP