Many consumer groups, campaigners and policymakers have argued that aspects of the leasehold system are unfair.
Just some of the issues for owners of leasehold properties have included: high ground rent charges, the cost of lease extensions, short leases making selling and mortgaging a property hard or impossible, and bad property management by freeholders or external management companies.
In May 2024, the Leasehold and Freehold Reform Act 2024 was passed – the first major piece of legislation since ground rents for new leasehold properties were restricted to zero in 2022.
So far, only a few of the measures have been implemented, but more details about a new Bill to move things forward were announced in The King’s Speech on 13th May.
Here are 5 key things to know about the recent and future changes, and what they mean for you as a landlord:
1. You can apply to extend a lease or buy the freehold as soon as you own the property
Leaseholders now no longer have to wait for two years after taking ownership of their property to extend the lease or buy the freehold – this requirement was removed from February 2025.
This means that if you’ve bought a property with a short lease, you can now potentially increase the value much sooner than before. As an investor, that could give you a lot more flexibility on financing, such as:
• Being able to get a loan on a previously unmortgageable property
• Reducing your LTV
• Withdrawing equity to reinvest elsewhere
Note: You can’t take any action until you are formally registered as the owner at the Land Registry, so there could be a delay after purchase.
2. If you’re not happy with the current property management, you (and the other leaseholders) can now set up your own management company
In March 2025, significant reforms to the Right to Manage regime came into force, making it easier for more leaseholders to take control of management and reducing the circumstances in which freeholders can recover their costs.
So, if your leasehold property is being managed badly, you can now take charge and form a management company with all the other owners. Potentially being able to ensure the property is well maintained and run efficiently is likely to mean happier tenants who want to stay longer. A safer, more attractive property could also allow you to charge a slightly higher rent.
3. The Leasehold and Commonhold Reform Bill will be introduced to Parliament
The King confirmed this Bill will be brought forward in this session. It proposes:
• Banning leasehold for most new flats and making ‘commonhold’ the default tenure.
• Capping existing ground rents at £250 a year, reducing to a ‘peppercorn’ rent (zero) after 40 years.
• Amending the Leasehold and Freehold Reform Act to make it cheaper and easier to extend a lease or buy the freehold.
If passed, these changes are not likely to come into force until for a while yet. However, if they are implemented as proposed, it will then mean that landlords who choose to invest in new flats could have much greater security of ownership and if you already own leasehold properties, you should have more peace of mind that your ground rent can’t be more than £250 a year, which might mean a reduction in your costs.
4. Three further government consultations have already been completed
These consultations have been held, and we are awaiting the government’s response on the proposals:
• Implementing consumer protection provisions, service charges and legal costs for owners of homes on freehold estates.
• Permitted insurance fees – to stop leaseholders being charged for ‘excessive and opaque’ building insurance commissions that are paid to landlords, freeholders and property managers. This should ensure leaseholders only pay fair costs for insuring the building.
• Strengthening leaseholder protections over charges and services, including:
o service charges
o building insurance
o litigation costs
o making changes to the consultation process where major works are required
o regulating managing agents
5. More changes have already been outlined, including increasing lease lengths and enabling leaseholders to hold freeholders to account
Some of the other proposals in the Leasehold and Freehold Reform Act that will be implemented over time:
• Standard lease extension terms will be increased from the current 50 or 90 years to 990 years, which will give landlord owners much greater security of tenure.
• Freeholders who manage their building directly will have to belong to a redress scheme, meaning it will be much easier to hold them to account if they are failing in their management duties.
• Freeholders will have a maximum time limit to supply the information required when a leasehold property is bought or sold. This should speed up the process, which can currently be significantly delayed and cost landlords a lot of money in lost potential rent.
These changes are all great news for landlords, as they should gradually make buying and owning an investment flat much easier and less expensive over time.
Thinking of buying a leasehold property?
For now, while so much legislation is yet to be passed, here are three important steps to take if you’re thinking of buying a leasehold property:
1. If the lease length is below 100 years, ask your conveyancer to find out the cost and terms for extending it.
2. Is there an appropriate sinking fund that will cover the cost of larger works to the property in the foreseeable future?
3. Are there any lease restrictions on making alterations, subletting, letting to pets.?
If you would like more information, the government recently published a ‘toolkit’ on its website that outlines all the reforms and what they mean, with a comprehensive list of where you can get further help and advice.
And if you are keen to find a new investment flat or you would like any help managing one you already own, we’re here to help. Just get in touch with your nearest branch and speak to one of our lettings experts.
