From today, leaseholders will no longer be required to have owned their property for a minimum period of two years before being able to make a statutory lease extension claim of a flat.
Housing minister Matthew Pennycook last week signed regulations to remove the two-year ownership rule for leaseholders of flats and houses to extend their lease or buy their freehold.
The change will offer leaseholders the flexibility to make a claim immediately upon buying a leasehold property and reduce their costs as a result.
Until now, under the Leasehold Reform, Housing and Urban Development Act 1993, leaseholders had to have been the registered owner of their leasehold interest at the Land Registry for at least two years, or spend additional professional fees in taking a formal assignment from a seller of their right to extent their lease. The scrapping of the two-year rule means the process will be greatly simplified.
Katie Cohen, residential property partner at Keystone Law, commented: “Under the new provisions of LAFRA, the two-year ownership rule is abolished, allowing leaseholders to extend their leases of their flats or houses or purchase the freehold of their houses 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. 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.”
But the so-called ‘registration gap’ which has come about due to the backlog in registering changes in ownership at the Land Registry, may hamper this provision as claimants will be unable to evidence their entitlement to make a lease claim until they are registered as owners. Patience may therefore continue to be the watchword.
This the first of a number of reforms to the leasehold sector proposed by the government, with a draft Commonhold and Leasehold Reform Bill expected later this year, introducing an alternative form of home ownership, in the form of commonhold, along with a further consultation on the rates applicable to enfranchisement valuations.
Cohen added: “This change introduces potential pitfalls due to the land registration gap. The registration gap is the period between the completion of a property purchase and the registration of the buyer as the legal owner at the Land Registry. During this time, the buyer holds the property in equity only, which can complicate matters such as serving notices or dealing with the property. The significant backlogs and delays being experienced by the Land Registry must be addressed to enable leaseholders to benefit from this reform.
“Despite the removal of the two-year rule, leaseholders who have purchased but are awaiting registration may face challenges in exercising their rights during this gap. This issue is particularly relevant for leaseholders who need to extend their leases due to mortgage conditions or other time-sensitive matters.”
Leasehold Reform moves a step closer as government makes major announcement
LAFRA does not establish a new form of tenure; Commonhold. That has been on the statute books since 2002. Developers have simply ignored it because they cannot monetise it like leasehold.
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