Relief for leaseholders – the “two-year” rule is no more
Provided that certain qualifying conditions are met, long leaseholders of houses and flats are entitled either to purchase the freehold of their building or extend their leases pursuant to the provisions of either the Leasehold Reform Act 1967 or the Leasehold Reform, Housing and Urban Development Act 1993. Those rights have, until now, been subject to a condition that the leaseholder has been the legal owner of the property for at least two years prior to making a claim. This is often referred to as the “two-year rule”.
The previous Government promised to abolish the two-year rule and passed the Leasehold and Freehold Reform Act 2024 (“LFRA”) on 24 May 2024. However, section 27 of LFRA, which deals with the abolition of the two-year rule, did not immediately come into force.
In good news for leaseholders, the Leasehold and Freehold Reform Act 2024 (Commencement No.2 and Transitional Provision) Regulations 2025 have now been passed bringing section 27 of LFRA into force on Friday 31 January 2025. Accordingly, there will no longer be a need for leaseholders to own their properties for two years prior to commencing enfranchisement and extension claims.
Whilst this is a positive step, there remains uncertainty as to when the potential changes to the valuation methodology are likely to be implemented. Leaseholders and freeholders still, therefore, don’t know how (or indeed when) they are likely to be financially affected by LFRA (or any other legislation that the Government may propose). The provisions of LFRA include (amongst a variety of other things) a comprehensive overhaul of the law relating to the valuation process when extending leases. However, the Government has stated that further consultations will take place before changes to the valuation provisions are made. This suggests that any reforms are unlikely to be implemented within the next 12 months.
If you would like to discuss any issues concerning enfranchisement or lease extensions, please contact either Jim McKeever, Michael Kilner, or Jennifer Slater who will be happy to help.
