RICS Welcomes Progress on Leasehold Reform

On 21 November 2024, Matthew Pennycook, Minister for Housing and Planning, provided an update on the next steps to reforming the leasehold market. This marks the first detailed announcement on leasehold reforms under the new government.

The key announcements include:

• Removal of the ‘2-Year Rule’ (January 2025): The government intends to implement the Leasehold and Freehold Reform (2024) Act's provision to abolish the ‘2-year rule.’ This change will allow leaseholders to extend their lease or purchase their freehold immediately after acquiring their property.
• Right-to-Manage Provisions (Spring 2025): These provisions will make it easier for leaseholders in mixed-use buildings to assume management responsibilities from freeholders. In most cases, leaseholders making claims will no longer have to cover the freeholder’s costs. However, secondary legislation is required to clarify voting rights and other procedural aspects.
• Introduction of the Leasehold and Commonhold Reform Bill (Second Half of 2025): This bill aims to establish commonhold as the default tenure type by the end of the current parliament, representing a significant shift in property ownership models.

The government has also committed to launching consultations on several key issues to support the reforms:

• Building Insurance Commissions: Proposals to ban commissions for landlords, property managers, and freeholders, replacing them with fees.
• Service Charges and Legal Costs: Initiatives to improve transparency and strengthen leaseholders' ability to challenge unreasonable charges.
• Enfranchisement Premium Valuation Rates: Reviewing the methodology for calculating enfranchisement premiums.
• Consumer Protection: New protections for up to 1.75 million homes subject to charges.

Additionally, the government plans to introduce mandatory professional qualifications for managing agents to enhance service quality and boost leaseholder satisfaction, with consultations set to launch in 2025.

RICS recognises the reforms will have a significant impact on a number of members and we will be responding to the consultations and working with the government, and members, to shape the changes. RICS have launched our Leasehold Reform Hub and members wishing to learn more can email standards@rics.org

Responding to the announcement, Mairéad Anne Carroll, RICS Senior Specialist commented:

“Following the passage of the Leasehold and Freehold Reform Act before the General Election, the market faced significant uncertainty regarding the timing of reforms. We welcome the Minister’s announcement, which provides much-needed clarity and helps the sector prepare for these changes.

“Strengthening leaseholder rights is central to these reforms. RICS has been actively working with the government to support this agenda, including through the Secretary of State-approved RICS Service Charge Code, which promotes best practices in the management of fees and leaseholder services and the development of a Block Management Sector Code which would provide consumers with much-needed clarity on the role and responsibilities of managing agents.

“RICS sets the benchmark for managing agents through our rigorous professional qualifications, mandatory standards, and regulatory frameworks. However, not all managing agents belong to professional bodies, creating gaps in competency and consumer protection. We are encouraged by the government’s intention to mandate qualifications across the sector and urge them to collaborate with established organisations like RICS to implement these frameworks effectively.

“We have called on the government to prioritise clarity around ground rent reforms. Publishing the outcomes must remain a key focus to support leaseholders with purchases and enfranchisement decisions and provide investors with the certainty needed to plan future investments.

“RICS is committed to supporting the government in shaping reforms that prioritise professionalism and leaseholder rights while building on the best-in-class structures we have developed.”