Homeowners set to wait even longer for leasehold reform – here's what's happening

Leasehold and freehold are the two main types of property ownership in England and Wales. Unlike freehold, with leasehold you only own the property for a fixed period of time, after which it returns to the freeholder. Just under five million properties in England are thought to be leasehold, the majority of which are flats.

Leasehold properties also have a lease. Leases need extending before they get too short, something that's both complicated to do and can cost homeowners £1,000s and sometimes £10,000s. The previous Government had vowed to give a fairer deal to leasehold homeowners, including making it cheaper to extend a lease and purchase a freehold – but many of these measures have now been delayed.

Key leasehold reforms have been delayed

The Leasehold and Freehold Reform Act (LFRA), which aimed to overhaul the leasehold sector, was introduced by the Conservative Government and became law in May 2024. Some of its key provisions aim to make it both easier and cheaper to extend a lease and purchase a freehold. For example, among other things, the Act intended to:

• Give all leaseholders the ability to extend their lease by 990 years. Currently, it's only possible to extend the lease on a flat by 90 years and by 50 years on houses (leasehold houses are rare).

• Reduce the cost of extending your lease. One of the charges involved in the cost of extending a lease or purchasing a freehold, known as 'marriage value', would be abolished. Marriage value is the amount of extra value a lease extension would add to your property – something you have to share with your freeholder if you're extending a lease that's less than 80 years in length.

However, many sections of the Act – including those mentioned above – did not become effective immediately in May. Instead, they require yet more laws to be laid by ministers before they can start to benefit leaseholders. The outgoing Government did not get around to this before the General Election.

The new Government has now announced that the additional laws won't be put in place until a number of issues have been resolved. These include a rethink of how much lease extensions will cost going forward and how to make it easier for shared ownership homeowners to extend their lease.

In a statement to Parliament on 21 November, the minister for housing and planning, Matthew Pennycook, said the LFRA contained "a small number of specific but serious flaws which would prevent certain provisions from operating as intended". He added: "Switching on the Act in full will therefore take time, but it is important that we get it right".

Martin Lewis: 'Someone really needs to get a handle on this'

Responding to news of the delays on X, MoneySavingExpert.com (MSE) founder Martin Lewis said he could "almost hear the collective groan of leaseholders":

Some existing measures are still going ahead

The Government says:

• The scrapping of the 'two-year rule' will take effect, as planned, in January 2025 (though the specific date is yet to be announced). This rule currently prevents homeowners from extending their lease until they've been the owner for two years.

• More homeowners will become eligible to take over the management of their building from spring 2025. The so-called 'right to manage' will be expanded to more people living in mixed-use buildings (buildings that also have non-residential spaces). Read more about how right to manage works in our Buying a freehold guide.

The Government also confirmed that some elements of the LFRA have already taken effect unchanged, including:

• Changes to legal costs associated with remedial work on unsafe buildings.

• The removal of the possibility of homeowners losing their home in the event they fail to pay 'income supporting rent charges' after 40 days.

Separately, in 2022 other legislation took effect which banned ground rent on most new leases, meaning you shouldn't be charged ground rent if you buy a new leasehold home.

Bigger changes could be on the horizon

Mr Pennycook said that the Government will now seek to tackle a range of problems "left untouched" by the LFRA, such as unregulated and unaffordable ground rents and the poor quality of service provided by some managing agents.

In addition, the Government will also look at the threat of forfeiture as a means of ensuring compliance with a lease agreement (where the property can revert to the freeholder if you don't comply with the lease agreement); and the prevalence of 'fleecehold' private and mixed-tenure housing estates (where the property is sold as a freehold, but the estate is maintained privately, so you still have to pay service charges with even fewer rights to challenge them).

As part of its solution to these problems, the Government plans to introduce an "ambitious" Leasehold and Commonhold Reform Bill next year. A central focus of this will be to "reinvigorate" commonhold, a type of property tenure where buildings are divided into 'freehold units' and common areas are managed by a commonhold association (itself owned by the freeholders of the flats).

I am a leaseholder – what can I do now?

With so much uncertainty, it can be difficult to decide what to do if you're a leaseholder.

Extending a lease

Leases often cost £1,000s to extend, but it can become much more expensive if a lease drops below 80 years in length (even by just a day). The price typically starts to increase even if there's 85 years left. But, if and when marriage value is abolished, the 80-year rule will no longer apply – plus leases are expected to become cheaper to extend in general.

Some homeowners are holding off extending their lease until leasehold is reformed so that they can benefit from the reduction in cost. But it remains unclear when the reform will take effect – it could be years. And we don’t know how much cheaper extending will become. Linz Darlington, of lease extension solicitors' firm Homehold, said the latest delays meant leaseholders might now be waiting "until 2026 at the earliest, likely longer".

See our Should I extend my lease? guide for more information about what to consider if you're delaying extending your lease.

Service charges

It's expected that leasehold reform will eventually give leaseholders greater oversight of service charges and the power to challenge them.

For now, if you believe the level of service charge you're paying is unfair, there are a few options. The first step is usually to try complaining directly to the freeholder or management company. If that doesn't work, you can then escalate your complaint to the First-Tier Tribunal. For help with this, see our Leasehold guide.

Another option is to consider taking over the management of your building (if you and your neighbours are willing to take on the responsibility) – for more info, see Right to manage.

Ground rent

Many leaseholders pay an annual ground rent to their freeholder, something that can be £100s. But ground rent automatically reduces to zero if you formally extend your lease (this is already the case under leasehold law).

Sadly, aside from a formal lease extension, it can be difficult to amend your ground rent – our Leasehold guide runs through some options, which might be available to you.