One year after the Leasehold and Freehold Reform Act 2024 received Royal Assent, property professionals have warned that the legislation has yet to deliver meaningful change, with many describing the situation as stalled, confusing and increasingly costly for leaseholders.
A new survey from the Association of Leasehold Enfranchisement Practitioners (ALEP) has revealed mounting frustration among those working on the frontline of leasehold reform.
While the Act was intended to simplify and improve leasehold transactions – including lease extensions and enfranchisements – practitioners report that its main provisions remain unimplemented and its impact negligible.
Key elements of the legislation, such as the removal of marriage value and a cap on ground rent when calculating enfranchisement premiums, have yet to take effect. According to ALEP, this is due in part to legal challenges under the Human Rights Act brought by freeholders, as well as the complexity of the legislation itself, which requires detailed secondary legislation and consultation before it can be made operational.
Asked whether the process of extending a lease had become easier since the Act’s passage, 67% of ALEP members said it had not, while the remaining 33% said there had been no noticeable change.
“We are all stuck in limbo,” noted one respondent, echoing widespread sentiment among professionals.
John Midgley, a director of ALEP, criticised the speed at which the Act was passed. “The Leasehold and Freehold Reform Act 2024 was passed with great haste, in the ‘wash up’ at the end of the last parliament, just before the election.
“The result is exactly what many of us feared – a piecemeal piece of legislation that not only requires extensive secondary legislation and time to enact, but also by the government’s own admission needs primary legislation to fix fundamental flaws in the valuation mechanism before it can be made ‘live’,” he said.
“The market is now caught in a state of indecision, and both leaseholders and their advisers need clarity.”
“A DOG’S DINNER”
ALEP’s latest findings reinforce views expressed in a similar survey last year, when 94% of respondents said the Bill had been rushed. This year’s results suggest even greater concern. Descriptions of the Act from professionals range from “a dog’s dinner” to “a poisoned chalice” and “terrible”.
The confusion has led to professional uncertainty, with many practitioners saying they are only able to offer general guidance rather than clear advice. Several noted that any recommendation depends on whether the abolition of marriage value is upheld and what changes, if any, are made to deferment rates. One adviser described the current approach as “guesswork”.
There is also strong evidence that this uncertainty is affecting the market. A significant majority of ALEP members have observed a decline in client activity since the Act’s introduction, with leaseholders frequently delaying action and freeholders refusing to engage.
Only those facing urgent personal circumstances – such as a remortgage or bereavement – appear willing to proceed.
The result has been a marked slowdown in decision-making and transaction times. “Most clients seem to be paralysed by the ‘do we, don’t we’ choice,” said one member, with others citing increased costs and stress for clients already grappling with a complex legal process.
HIGHER PREMIUMS
Over 80% of survey respondents said the Act had caused unintended consequences, including stalled lease extensions, a fall in transaction volumes, and rising costs. In some cases, leaseholders who delayed claims in anticipation of the Act’s benefits have found themselves paying higher premiums as time has passed.
Several practitioners also highlighted concerns about valuation changes, particularly around deferment and capitalisation rates, which could ultimately push premiums up – contrary to the expectations of many leaseholders.
Intermediate leasehold interests remain a point of contention, with one respondent warning that proposed simplifications “will likely result in a higher premium”.
Despite these setbacks, ALEP members remain broadly supportive of the need for reform, though they stress it must be well considered and delivered through a process that involves professionals and reflects the complexities of the sector.
PAST MISTAKES MUST BE AVOIDED
Mark Chick, a director of ALEP, said: “There is no appetite among practitioners to turn back the clock on reform. But we must avoid repeating past mistakes. The next stage – whether delivered by secondary legislation or a future Bill, both of which we anticipate – must be built on evidence, engagement and proper scrutiny.
“We will continue to support the development of a fairer and better functioning system for leaseholders and freeholders alike.
“ALEP remains committed to supporting constructive dialogue between government, leaseholders, and professionals in this complex but critical area of property law.”
