Last Friday marked a significant moment of leasehold reform as the Leasehold and Freehold Reform Act 2024 (Commencement No 2 and Transitional Provision) Regulations 2025 (SI 2025/57) came into force on 31 January 2025. Leaseholders no longer need to have owned their property for at least 2 years to qualify for a statutory lease extension or to initiate an enfranchisement claim to acquire the freehold. In this insight, we summarise the changes and look at how these may impact Registered Providers. 

Background 

Under the previous legislation, leaseholders were required to own their property for at least two years before they were eligible to initiate a statutory lease extension or enfranchisement process to acquire the freehold. 

The Leasehold and Freehold Reform Act 2024, which contained measures to better protect leaseholders, was passed in May last year, but most of the reforms are yet to be implemented and require secondary legislation to come into effect. The Leasehold and Freehold Reform Act 2024 (Commencement No 2 and Transitional Provision) Regulations 2025 (SI 2025/57) were made on 22 January 2025 and took effect on 31 January 2025. These Regulations bring into force section 27 of the Leasehold and Freehold Reform Act 2024. 

Abolition of the two-year ownership requirement 

Section 27 of the Leasehold and Freehold Reform Act 2024 abolishes the two-year ownership requirement for lease extension claims and claims to acquire the freehold under the Leasehold Reform Act 1967 and lease extension claims under the Leasehold Reform Housing and Urban Development Act 1993. Significantly, this change is not limited to new leases entered into after January 31 but also benefits existing leaseholders. Leaseholders can now qualify for a statutory lease extension or initiate an enfranchisement claim to acquire the freehold without having owned the property for two years. It is important to note, however, that the applicant will still need to be the registered proprietor, as any such claims must be made by the legal owner. In order to avoid delays as a result of registration, the seller may serve the claim notice for a lease extension or enfranchisement which can then be assigned to the buyer on completion. 

What Next? 

The Housing Minister, Matthew Pennycook, declared that this reform is an initial step towards an overhaul of the leasehold system and that this reform is aimed at giving flexibility to leaseholders and reducing costs. Mr Pennycook has stated that work will now continue to implement the rest of the measures outlined in the Leasehold and Freehold Reform Act 2024. There will be consultations taking place this summer on the valuation rates used to calculate lease extension and enfranchisement premiums with a view to further reforms being implemented at a later date. 

Potential Impact of the Changes 

The removal of the two-year ownership requirement is a significant step in making the leasehold extension, and enfranchisement processes more accessible to leaseholders. These reforms may lead to a surge in statutory lease extension and enfranchisement requests. Registered Providers should, therefore, ensure that they have the necessary resources and processes in place to deal with an increased number of claims and that they are clear on the requirements as to valuations and timescales for service of counter-notices. 

How Capsticks can help 

Our Housing & Regeneration team acts for over 200 Registered Providers in respect of development acquisitions, lease transactions (landlord and tenant), statutory agreements and site due diligence. If your organisation is impacted with the changes, please get in touch with Spencer Vella Sultana.