The labour government has brought into force an important provision of the Leasehold and Freehold Reform Act 2024 which came into effect on 31 January 2025 – The removal of the two-year ownership rule.
What was the two-year ownership rule?
Previously, leaseholders of flats and houses had to wait 2 years before they could apply to extend their lease or purchase the freehold of their leasehold house. What made matters worse was the fact that the two-year ownership rule applied from the date of registration at Land Registry rather than the date of purchase. With long registration delays at Land Registry, leaseholders were often facing a much longer wait than two years.
This caused many problems for leaseholders. The most detrimental was the lease length continued to depreciate during the two-year wait, thus increasing the premium to extend the lease or purchase the freehold. It also caused problems where the lease length was about to drop below 80 years meaning an additional payment called marriage value would be payable on top of the premium to extend the lease.
Leaseholders who were trying to buy properties or remortgage during the two-year wait could only extend their lease or purchase the freehold of their leasehold houses if the landlord agreed informally. There was no option to force the landlord to extend the lease or sell the freehold.
Luckily, if leaseholders were buying flats with short leases, the seller could assign the benefit of the lease extension or purchase of freehold claim, so that the buyer could take advantage of the sellers period of ownership. This was cumbersome and expensive as it served to increase legal fees and complicate sales and purchases (not to mention add additional stress to an already stressful process).
A new era for leaseholders
With the removal of the two-year ownership rule, leaseholders no longer have to wait to extend their lease or purchase their freehold after becoming the registered owner. Land Registry can also expedite registration requests in light of a pending lease extension or purchase of freehold claim and so the process can be accessed a lot faster than it did before.
The sale and purchase process no longer needs to be complicated by the assignment of statutory rights. The reform gives leaseholders greater flexibility and control over when they exercise their property rights and also allows those with mortgages that are dependent on lease length to deal with the issues a lot quicker. Leaseholders now have the freedom to choose a statutory or an informal claim instead of only having just the one option to accept an informal deal.
How Moore Barlow can help
If you are a leaseholder, it is the perfect time to review your lease length and take advantage of the change in law. If you would like further information, please contact our Leasehold Enfranchisement Team.
