UK Leasehold Reform 2025: What You Need to Know

As of January 31, 2025, significant developments have occurred in the UK’s leasehold reform landscape.

The UK property landscape is undergoing significant changes with the latest UK leasehold reform 2025, offering better rights and protections for homeowners. If you’re a leaseholder or looking to buy a property with a leasehold tenure, these new reforms could have a direct impact on your rights, costs, and long-term property security. Here’s what you need to know about the latest developments.

Immediate Lease Extensions and Freehold Purchases

One of the most significant changes is the abolition of the two-year ownership requirement. Previously, leaseholders had to wait two years before they could extend their lease or purchase the freehold of their property. With the introduction of the Leasehold and Freehold Reform Act 2024, this waiting period has been removed. This means that as soon as you buy a leasehold property, you can take action to secure your rights without delay.

This is a game-changer for leaseholders, especially those purchasing properties with short leases. It offers more control over property ownership and potentially reduces the costs associated with leasehold extensions, which typically increase as a lease gets shorter.

Consultation on Building Insurance Referral Fees

The government is also cracking down on unfair building insurance referral fees. Freeholders and managing agents have traditionally received commissions from insurers when arranging building insurance for leasehold properties—costs that are often passed on to leaseholders through service charges.

A government consultation, launched on December 2, 2024, proposes banning these commissions and replacing them with a fair and transparent handling fee structure. Leaseholders are encouraged to participate in this consultation, which remains open until February 24, 2025.

This is a welcome change, as it will help ensure leaseholders are not unfairly charged excessive fees for essential building insurance. If you own a leasehold property, now is the time to have your say and contribute to shaping these important reforms.

The Future of Leasehold: Commonhold Reform

The government is also looking ahead to the long-term future of leasehold ownership. A draft Leasehold and Commonhold Reform Bill is expected to be introduced in the second half of 2025. This legislation aims to modernise the commonhold system and make it the default tenure for new homes.

Commonhold is an alternative to leasehold, allowing homeowners to own their property outright with shared responsibility for communal areas, without the need for a freeholder or lease. While it has been available since 2002, it has struggled to gain traction. However, with growing dissatisfaction around leasehold ownership, the government is keen to push commonhold as a viable alternative, making homeownership fairer and more transparent.

What These Reforms Mean for You

These reforms represent a significant step toward a fairer housing market. Whether you’re a current leaseholder, considering buying a leasehold property, or interested in future property investment, understanding these changes is crucial.

At Ello Property, we’re committed to keeping you informed about key property market changes. Stay tuned for further updates as UK leasehold reform 2025 continues to unfold!

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