Abolishing The 2-Year Rule
The passing of the Leasehold and Freehold Reform Act 2024 (LFRA 2024) was seen as a starting point for the long-awaited reform to the areas of lease extension, collective enfranchisement and right to manage. The proposed reforms were, it is fair to say, overwhelmingly tenant friendly with some of the key points being:
- Remove the 2-year ownership requirement for the leaseholder to commence the process;
- Increase the compulsory extension from 90 years to a whopping 990 years;
- Remove the requirement for the leaseholder to pay ‘marriage value’;
- Remove the ability of the landlord to recover their costs from the leaseholder in most situations.
However, the LFRA 2024 did not provide a commencement date nor calculations as to how any new regime would work leading to the position of secondary legislation being required to make the proposed changes.
There were however whispers that such tenant-friendly reforms would be challenged by large landlord groups as potentially being against their human rights as removing marriage value payments would potentially wipe millions of pounds from the property market for no compensation.
In the King’s Speech, Labour confirmed that some of the changes proposed would require more time to consider but some of the low-hanging fruit could be dealt with in more short order.
To that end, the first commencement regulation has now passed which acts to actively remove the 2-year ownership requirement as of Friday 31 January 2025 for lease extensions of flats.
It will also act to scrap the ability of personal representatives to serve notices on behalf of a deceased legal owner from the same date.
This will have an impact on how practitioners handle lease extensions, especially where the flat is the subject of an impending sale.
Judicial Review of LFRA 2024
Ironically the day before the implementation of the first implementation above, on 30 January 2025 a hearing at the Royal Courts of Justice granted permission for a group of six landlords permission on all grounds to apply for Judicial Review of the LFRA 2024 on the grounds that it is incompatible with the Human Rights Act 1998.
It is expected that the full hearing shall be heard in around July 2025. This casts further significant doubt in relation to the proposed amendments and whether they shall ever be implemented.
It can certainly be seen how effectively abolishing marriage value and significantly wiping away a landlord’s portfolio valuation could breach the right to property and we shall therefore await a result with bated breath.
Contact Us
It can be seen that this is a constantly evolving landscape. Please ensure that you instruct specialists in this ever-changing area as the consequences of serving an invalid notice can be severe.
Ronald Fletcher Baker’s leasehold enfranchisement team stands ready to provide expert guidance, crafting tailored advice to suit the unique nuances of both leaseholders and freeholders. Contact us today.
Ben Frost
Litigation Partner
