How and when will the Leasehold and Freehold Reform Act 2024 be implemented?

The Leasehold and Freehold Reform Act 2024 (LAFRA) marks a significant step in the ongoing reform of leasehold and freehold property law in England and Wales. Many of the provisions are yet to be enforced but one key development which took effect on 31 January 2025, promises to bring substantial changes to the landscape of leasehold and freehold ownership, particularly concerning lease extensions for houses and flats, as well as the purchase of freeholds.

One of the most notable reforms is the abolition of the two-year ownership rule for lease extensions of houses and flats under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended) (1993 Act) and the right to acquire the freehold of houses under the Leasehold Reform Act 1967 (1967 Act). This is an encouraging step forward for leaseholders but arguably very minor, non-contentious and welcomed.

However, as with any legislative change of this magnitude, the implementation of LAFRA will present a number of challenges and ongoing consultations to address outstanding issues.

Abolition of the Two-Year Ownership Rule

Historically, leaseholders of both houses and flats were required to have owned and been the registered owner at the Land Registry, of their property for at least two years before they could extend the lease of their house or flat or purchase the freehold of their house. This condition has long been a source of frustration for leaseholders, especially those who wish to secure the long-term value of their homes but find themselves restricted by the two-year ownership threshold.

Under the new provisions of LAFRA, this two-year ownership rule is abolished, allowing leaseholders to extend their leases or purchase the freehold immediately upon acquiring the property. This reform aims to provide leaseholders with greater flexibility and reduce the barriers to securing more secure ownership of their homes.

The practical effect of this reform will be immediate as of 31 January 2025. Leaseholders of both houses and flats will be able to initiate lease extensions and freehold purchase applications without having to wait for the two-year period. This is particularly beneficial for new homeowners who may have purchased a leasehold property only to face the challenges of securing a lease extension in a short amount of time. By eliminating the two-year waiting period, LAFRA facilitates the ability to engage in these transactions at an earlier stage of ownership.

Statutory Instrument and Provisional Arrangements

The statutory instrument (SI) that will implement the abolition of the two-year rule under the Leasehold and Freehold Reform Act 2024 (LAFRA) is The Leasehold and Freehold Reform (Implementation) Regulations 2025.

Despite the statutory safeguards, there are concerns about the practical difficulties that may arise from these changes. One area of particular concern is the registration gap.

The registration gap

The registration gap refers to the time lag between the completion of a transaction and the official recording of that transaction by the Land Registry. This gap can lead to situations where leaseholders are unable to exercise their rights under LAFRA immediately after acquiring a property, due to the delayed registration of their ownership interest.

The Land Registry is currently facing significant delays in processing registrations, which could complicate the timely implementation of LAFRA’s provisions. Leasehold and freehold transactions must be registered with the Land Registry to be legally recognised, and any delays in this process may have a direct impact on lease extension applications and freehold purchases.

Given the complexity and volume of property transactions in England and Wales, the Land Registry has struggled to cope with the increasing demand for registration, leading to delays in processing. These delays are expected to persist throughout 2025, further complicating the smooth application of LAFRA’s reforms.

To mitigate these issues, the government has indicated that it will work closely with the Land Registry to streamline processes and reduce backlogs. However, in the short term, there may be practical difficulties for leaseholders looking to extend leases or purchase freeholds as the gap between ownership and registration persists.

What reforms are expected in 2025?

While LAFRA represents a significant reform, it is unlikely to be the final word on leasehold and freehold property law. Throughout 2025, further reforms and consultations are expected to follow. These will likely address unresolved issues and aim to refine the provisions of LAFRA to ensure that leaseholders and freeholders are adequately protected.

One area that will likely receive further attention is the issue of valuation methods for leasehold extensions and freehold purchases. The government has acknowledged that current methods of valuation may not always reflect the true value of the property, leading to discrepancies and potential disputes. Consultations on new, more transparent methods of valuation are expected to take place in 2025, with a view to implementing updated frameworks later in the year.

The government does plan to consult on how to restrict the sale of new leasehold flats, publish a white paper on commonhold reform later this year and introduce the Leasehold and Commonhold Reform Bill in the second half of 2025, so we await these with considerable interest.

Judicial review of LAFRA

In a significant development, the High Court on 30 January 2025 granted claimants permission to apply for judicial review of several provisions of LAFRA including the removal of marriage value from enfranchisement premiums. The claimants argued that certain aspects of LAFRA may be unlawful or not in compliance with established property law principles. In a two-day hearing at the Royal Courts of Justice, Mr Justice Chamberlain ruled that the six claims should proceed to a substantive hearing to decide whether those provisions of LAFRA should be declared to be incompatible with the right to property under the Human Rights Act 1998.

The substantive hearing of the judicial review application is scheduled for July 2025. The outcome of this hearing could lead to further revisions or adjustments to the provisions of LAFRA, depending on the High Court’s findings. The judicial review may also provide greater clarity on the legal interpretation of specific provisions within the Act, and it is likely to impact the way in which LAFRA is implemented in practice.

LAFRA represents a landmark moment in property law reform. With the abolition of the two-year ownership rule, leaseholders and freeholders will benefit from increased flexibility and security. However, challenges to its effectiveness in practice remain, particularly in relation to the registration gap and the ongoing, unsatisfactory delays at the Land Registry. Furthermore, ongoing consultations and a potential forthcoming judicial review with the substantive hearing set for July this year, suggest that further refinements to the law may be on the horizon throughout 2025 and possibly longer.

Legal practitioners and property stakeholders must remain vigilant to these developments to ensure they can effectively navigate the evolving leasehold reform landscape.

If you have questions or concerns about leasehold reform, please contact Katie Cohen.