Changes to the leasehold landscape in 2025

There are a number of changes on the horizon in 2025 concerning residential and commercial leasehold properties which will be explored in this article.

Leasehold and Freehold Reform Act

The Leasehold and Freehold Reform Act was passed on 24 May 2024. Whilst the main provisions of the Act have not yet taken effect, the government has pledged that this will take place as soon as possible. The Act applies to residential properties only.

The Act will strengthen existing rights for leaseholders and introduce new ones, including but not limited to:

• Making it cheaper and easier for people to extend their lease
• Increasing the standard lease extension term to 990 years for houses and flats
• Making buying or selling a leasehold property quicker and easier
• Banning the sale of new leasehold houses other than in exceptional circumstances
• Giving leaseholders greater transparency over their service charges
• Removing the requirement for a new leaseholder to have owned their house or flat for 2 years before they can extend their lease

Leasehold and Commonhold Reform Bill

The government is set to introduce this draft bill in the second half of 2025 which aims to enhance the rights of current leaseholders by:

• Reducing costs such as service charges
• Providing rights to leaseholders to manage their own properties by simplifying legal processes
• Removing the threat of forfeiture by removing the ability for landlords to forfeit leases due to small arrears

Longer term the bill is aimed at phasing out leasehold interests and encouraging the commonhold system Commonhold ownership was first introduced in 2002 as an alternative to leasehold ownership. It facilitates freehold ownership of individual flats, houses and non-residential units in a building or on an estate. The remainder of the relevant building or estate forms the commonhold and is owned and managed by joint flat owners through what is known as a commonhold association.

Service charge best practice

The Royal Institute of Chartered Surveyors is due to launch its professional standard on service charges in commercial property in the summer of this year.

The updated standard will focus on the issue of budgets, year-end certificates and disputes between landlords and tenants. There will also be clearer guidance on resolution of disputes. The aim is for the new standard to provide clarity and transparency to those involved in commercial property transactions.

Renters’ Rights Bill

The Renters’ Rights Bill is aimed at implementing substantial changes to the residential eviction process by giving tenants security by abolishing section 21 (no fault) evictions and making it illegal for landlords or agents to discrimination against prospective tenants who have children or are in receipt of benefits. The Bill will also reduce the risk for tenants who challenge rent increases by ensuring they have the right to appeal excessive above-market rents. Changes to the assured shorthold tenancy regime by abolishing new fixed-term tenancies which means that new tenancies will be periodic rather than fixed term, therefore removing the right for landlords to end them on expiry of the fixed term.

If you would like to discuss any of the proposed changes and the ways in which they may impact you, please contact a member of our Real Estate or Property Litigation team. This article was written with the assistance of Noemi Stepan-Sarkissian.