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Leasehold and Freehold Reform Act 2024 – January 2025 Update 

In the background, there is a house with a white moving van and boxes. In the foreground, there are two hands tearing up white piece of paper that reads 2 year ownership rule

Implementation of changes to ownership requirement rules

On 21 November 2024, Matthew Pennycook MP (the Minister for Housing and Planning) confirmed the Government would imminently introduce new regulations to abolish the two-year ownership rule for i) a leaseholder of a flat to extend their lease; and ii) a leaseholder of a house to extend their lease or purchase the freehold.  

It has now been confirmed that these changes will be implemented this Friday, 31 January 2025. 

Up until now, it has been regular practice for sellers of long leasehold properties to apply for a statutory lease extension (in accordance with the Leasehold Reform, Housing and Urban Development Act 1993) and immediately assign the benefit of the claim to the buyer upon completion. This procedure provided a framework for buyers to legitimately circumvent the two-year ownership rule before they could bring their own claim. As of this Friday, these steps will no longer be required. 

Buyers will now be able to make a statutory claim for a new lease as soon as they become the registered proprietor of the leasehold title at HM Land Registry. This point is noteworthy given HM Land Registry continues to experience a significant backlog of applications, resulting in an extended ‘registration gap’ – the period between completion and subsequent registration of the transaction at HM Land Registry.  

Accordingly, buyers will be prevented from exercising these rights immediately upon completion and not until registration of the legal title has been effected at HM Land Registry. This may result in some buyers not wishing to wait, in which case they will have to follow the current practice of the seller giving notice of the claim with the benefit being assigned to them upon completion. 

Conclusion 

Subject to potential delays resulting from the ‘registration gap’, these changes should empower leaseholders to enfranchise at their own convenience and without the potential pressure of having to undertake the exercise at the point of acquisition. 

Whilst the removal of the two-year ownership requirement will be welcomed by both buyers and sellers of leasehold properties, other proposed legislative changes introduced by the Leasehold and Freehold Reform Act 2024 are yet to be implemented. For example, buyers will still be faced with uncertainty as to whether a claim should be pursued under current valuation rules or to await implementation of the new provisions. We await further developments with interest. 

To discuss any of the points raised in this article, please contact Daniel Blake or fill in the form below. 

Daniel Blake

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