Leasehold Reform in 2025

Deep dive into the Leasehold and Freehold Reform Act 2024

Introduction
The Leasehold and Freehold Reform Act 2024 is the most significant overhaul of long-standing leasehold law in England and Wales for generations. It emerged from years of political pressure, high-profile stories of crippling service charges and onerous ground rents, and cross-party promises to simplify and modernise how people own homes. Some headline changes — a move towards near-permanent lease terms, the abolition of marriage value in many calculations, stronger rights to buy out ground rent and a ban on most new leasehold houses — promise to reshape the market for owners, investors, developers and lenders. But the Act is not a single instant switch: it is being introduced in stages, and much of its practical effect depends on secondary regulations, commencement orders and guidance that are still being finalised in 2025. This article explains what the Act contains, which parts are already in force, what remains to come, and how the changes are likely to affect rights, costs and practical strategies for the main stakeholder groups.

1. The legislative context and what has happened so far
   The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024 after intense debate in Parliament. The Act was deliberately wide in scope — it sets out primary law reforms but delegates much of the operational detail to secondary legislation (statutory instruments and government regulations) and guidance. That structure means the Act provides the new legal framework, but the real operational change happens when ministers bring individual sections into force and provide the detailed rules professionals rely on.

The first materially important commencement came with regulations made in January 2025, which brought section 27 into force on 31 January 2025. Section 27 removes the long-standing two-year ownership qualification that meant new buyers had to wait before exercising certain enfranchisement and lease extension rights. This change already has practical consequences for conveyancing, mortgage underwriting and negotiation dynamics in 2025. However, many other core measures, including the valuation rules that underpin premiums for lease extensions and freehold acquisitions, required secondary regulations and therefore remain in a transitional state. Practitioners must therefore be careful: the legal landscape is changing, but it is not uniform yet.

2. The headline reforms the Act introduces (summarised)
   Although some technical detail awaits regulations, the Act contains several headline reforms of immediate importance:

• A standard lease extension term of 990 years at a peppercorn (i.e. effectively no) ground rent for qualifying leases, replacing the old bespoke terms and bringing near-permanence to lease extensions.
• Abolition or heavy curtailment of “marriage value” in many valuations, meaning the additional premium previously payable when a lease had less than 80 years remaining is removed or sharply reduced in many cases.
• New mechanisms to buy out or extinguish ground rents separately from a lease extension, giving leaseholders a route to remove onerous ground rents without necessarily applying for a long extension.
• Removal of the two-year ownership qualification for many enfranchisement/extension claims (now in force as at 31 January 2025).
• Intended bans or severe curbs on selling new houses as leasehold, which will change how some estate developments are structured in future.
• Proposals to improve service charge transparency, to limit certain types of charges or fees, to protect leaseholders from unfair litigation costs and to make it easier to challenge charges at Tribunal.

3. Which parts are in force now (2025) — what you can rely on today
   The key point to understand in 2025 is that the Act itself is in place, but most provisions are staggered into force. The most notable provision that has already commenced is the removal of the two-year ownership rule (section 27), implemented by a statutory instrument on 31 January 2025. That statutory instrument means many buyers can exercise enfranchisement or lease extension rights immediately after purchase rather than waiting two years — a substantial change that affects negotiations, mortgage conditions, and the timing of enfranchisement claims.

However, some of the other biggest practical effects you might read about — the detailed valuation method for 990-year extensions, the exact mechanism for marriage value abolition, caps on particular categories of service charges, and the mechanics for buying out ground rents — require specific regulations that, at the time of writing, are still being consulted on or prepared. Those regulations will determine the arithmetic of premiums, the precise triggers for enfranchisement rights, transitional protections and whether any exceptions apply. The Commons Library and major industry bodies have emphasised this point: the Act sets the direction of travel, but the operational detail is being written in 2025 and beyond.

4. Why the two-year rule mattered and the practical effect of its removal
   Historically, the two-year ownership rule meant that buyers of leasehold property had to wait two years before exercising statutory rights to extend the lease or buy the freehold. That rule created friction in the market in two ways. For buyers, it made immediate enfranchisement or a lease extension impossible, sometimes complicating mortgage approvals or leaving purchasers exposed to a period of uncertainty. For sellers, it made some properties harder to sell since buyers were wary of the timing and cost of future enfranchisement.

Removing the two-year rule reduces those frictions. From 31 January 2025 many purchasers can commence statutory claims immediately, which encourages clearer pricing, simplifies conveyancing paperwork and reduces the strategic withholding of rights as a sale-conditioning tactic. But we must stress that while the timing barrier has gone, the price of a premium or the valuation method for a particular claim may still depend on regulations not yet in force. In short: buyers and their conveyancers can now bring claims sooner, but they still need up-to-date valuation and legal advice on the quantum of any payment required.

5. Valuation and marriage value — the arithmetic that changes the money
   One of the most commercially significant elements of the reforms is the treatment of marriage value. Under the old regime, if a lease had fewer than 80 years remaining, the calculation of the premium payable on an extension often included a marriage value uplift. Marriage value recognises that by combining the existing leaseholder’s remaining term with a new extended term, the property’s value is increased — and part of that uplift was conventionally shared with the freeholder.

The 2024 Act substantially curtails — and in many cases removes — marriage value from the statutory valuation formula. That legal change can dramatically reduce the premium a leaseholder pays when their lease has less than 80 years remaining, because a large component of the previous calculation is excluded. This is fundamental: for many leaseholders with shorter leases, the financial barrier to extending or enfranchising falls significantly. However, the exact valuation factors (discount rates, the structure of any residual allowances and how exceptional ground rents are treated) are set out in secondary regulations that are being finalised; as a result there is uncertainty over exact premium figures until those rules are published. Professional valuers and RICS have been issuing guidance notes to help practitioners navigate the transitional period, and lenders are updating underwriting criteria to reflect both the new law and the temporary uncertainty.

6. The 990-year standard and what it means in practice
   The Act’s move to a 990-year standard extension at a peppercorn ground rent is a dramatic re-set of expectations. In essence, when you secure a statutory lease extension under the new framework you are likely to receive an extension of almost a millennium with no ongoing ground rent — a near-permanent interest that is functionally very close to freehold ownership for most owners and lenders.

Practically, that reduces the need for repeat extensions and the market-level transaction flow around lease extension work. It also reduces future opportunities for freeholders to extract future premiums from successive generations of leaseholders. For investors and institutional freeholders, the implication is that the reversionary value — the value of the landlord’s future interest — is reduced under the new standard; that loss of value needs to be modelled in any yield calculation and balance-sheet assessment. This, in turn, affects valuations for acquisition, portfolio reappraisals and tax planning. Again, the exact compensation mechanics for landlords and the transitional protections for premium calculation are subject to the statutory instrument detail being rolled out following the Act.

7. Ground rents and the new buy-out mechanism
   Many leaseholders have long complained about escalating or disproportionately high ground rents embedded in old leases. The Act introduces mechanisms for leaseholders to buy out ground rents without having to take the longer route of a full lease extension. This is an important consumer protection because it offers a cheaper, quicker route to remove the most punitive elements of archaic leases.

How this works in practice will depend on the secondary regulations that set the valuation method and formal notice process, and the Act also anticipates transitional safeguards and carve-outs for unusual title structures. But the policy point is clear: ground rents that have become punitive will be less defensible under the new statutory regime, and many leaseholders can expect an easier path to extinguish those burdens.

8. The ban on new leasehold houses and implications for developers
   The Act signals — and the political direction since 2024 has reinforced — a shift away from selling houses on leasehold titles. While flats have traditionally been sold leasehold, entire estates of houses sold as leasehold (often within large private estates) have been a concern for reformers. By effectively banning or restricting the sale of new leasehold houses, the Act forces developers and estate managers to rethink how they capture long-term management revenue.

For developers this matters in three ways. First, it removes a revenue stream historically associated with ground rents and estate management fees that were bundled with long leases. Second, it requires developers to find alternative structures for estate management and maintenance, typically through freehold retention of management companies or long-term service contracts rather than private ground rents. Third, it changes the marketing proposition for new homes — the “freehold house” becomes the default, which simplifies consumer understanding but may reduce the ability to capture recurring income. Developers should therefore rework viability models, pricing strategies and contract templates to suit the new default tenure model.

9. Service charges, transparency and dispute resolution
   A frequent cause of dissatisfaction among leaseholders has been opaque service charges, unpredictable major works bills and a seemingly one-sided liability for legal costs. The Act responds by giving the state room to mandate greater transparency: clearer breakdowns of charges, tighter rules on how major works are tendered and charged, and a push to limit leaseholders’ exposure to disproportionate legal costs when challenging managers or freeholders. The government has signalled consultations in 2025 designed to fix these operational rules, and ministers have emphasised the need for minimum professional standards for managing agents and more robust recourse for leaseholders. Those consultations will determine whether new obligations fall on freeholders, managing agents or intermediaries — and the exact remedies available to leaseholders at the Tribunal.
10. What the changes mean for different stakeholder groups
    Owners and leaseholders
    • Shorter leases: if your lease is below 80 years the abolition of marriage value can materially reduce the premium to extend or enfranchise. Get a valuation and legal advice now; but note that some valuation rules are still being finalised, so outcome-specific advice is required.
    • Buying now: with the two-year rule removed, purchasers may be able to start claims immediately after completion — a negotiating point for purchase contracts and a matter of interest to mortgage lenders. Conveyancers should be explicit about the state of commencement and any ongoing uncertainty.

Investors and freeholders
• Revalue portfolios: institutional landlords need to re-estimate reversion values and yields assuming fewer opportunities for future premium income and a reduced role for marriage value. Where business plans rely on ongoing ground rents, those income lines need contingency planning or replacement.
• Transition claims: expect increased enfranchisement and buy-out claims over a transitional period, which may require operational resources and case management.

Developers and housebuilders
• Product strategy: move towards freehold houses and reconfigure estate management models. Consider the corporate structuring of management companies or stewardship models that create sustainable income without relying on ground rent extraction.
• Contracts and sales materials: update reservation agreements, buyers’ packs and transfer documentation to reflect the new default positions and the possibility of early enfranchisement or buy-outs.

Lenders and conveyancers
• Mortgage underwriting: lenders are already updating policies to reflect the removal of the two-year rule and the uncertainty around valuation until regulations settle. Expect more conservative LTVs or additional documentary requirements during the transition. Conveyancers must advise clients on both their current rights and the risk that underlying valuation rules are still moving.

Managing agents and professional advisers
• Standards and training: new minimum competence rules for managing agents are likely — professionals should anticipate formal qualification requirements and tighter professional oversight as consultations conclude.
• Transparency and systems: expect panels of creditors, clearer invoicing standards and more rigorous procurement processes for major works. Systems and IT will need updates to produce compliant records for leaseholders.

11. Costs, valuation uncertainty and tactical timing
    The twin features of the Act — radical headline changes and staged commencement — create a particular challenge: timing. For some leaseholders the best strategy may be to act quickly under the old regime before new rules change the balance (for instance, if transitional rules are unfavourable). For others the new regime will make waiting desirable because it lowers premiums (e.g. abolition of marriage value). The interplay of market timing, mortgage conditions and the publication date of secondary regulations means that tailored legal and valuation advice is essential.

Valuers are issuing guidance, but there is still significant uncertainty over the rates and discount factors to be used in statutory calculations. Until ministers finalise the secondary legislation and the courts begin to interpret contentious points, expect variations between valuer opinions and a period of negotiation and tribunal work as the new rules bed in.

12. Litigation risk and likely judicial oversight
    Given the scale of value transfers the Act creates — often shifting thousands of pounds per property from freeholder to leaseholder or vice versa — legal challenges are predictable. There have already been judicial review claims and permission hearings related to parts of the Act and its commencement. Courts will likely be asked to interpret ambiguous drafting, transitional protections and valuation formulas. For market participants, this means an elevated litigation risk in the short term and the possibility that some practices will be put on hold until courts clarify points of law. Legal teams and in-house counsel should prepare for claim volumes and for the need to brief courts on industry practice and valuation methodologies.
13. Practical checklist — immediate actions for 2025
    Owners / prospective buyers
    • Check your lease length: obtain specialist valuation advice if your lease is under 80 years.
    • If buying: include express contractual protections about enfranchisement rights and check lender requirements.
    • If considering extension or buy-out: seek quotes from at least two qualified valuers and instruct a specialist solicitor.

Investors / landlords
• Commission portfolio revaluations under the new statutory assumptions.
• Review cashflow models that depend on ground rents and reassess acquisition pricing and expected IRR.
• Prepare resource plans to deal with increased enfranchisement and buy-out claims.

Developers
• Amend product and tenure strategies to prioritise freehold houses and rethink estate management revenue models.
• Update all consumer documentation and sales materials to avoid promises that the law may remove.

Professionals (valuers, conveyancers, agents)
• Update template advice packs and client letters; ensure staff are trained on which sections of the Act have actually commenced.
• Monitor Government consultations and RICS/Law Society guidance for worked examples and precedent notices.

14. What to watch next (timeline and key signals)
    The practical progress of the reforms depends on a stream of government action and industry responses. Watch for:

• Further statutory instruments bringing sections of the Act into force (these are the moment the rules become operable). The January 2025 commencement for section 27 was an early example.
• Secondary regulations that set valuation rates, discounting methods and precise notice procedures — these will determine actual premiums.
• Government consultations on service charge transparency and the regulation of managing agents — these will shape operational obligations and compliance costs for managers and landlords.
• Industry guidance and case law from tribunals and higher courts that interpret ambiguous points and set practical precedent. Expect litigation to test new valuation methods and transitional protections.

15. Long term picture — commonhold, market structure and cultural change
    The Act sits inside a broader policy push that contemplates moving away from leasehold as the default large-scale tenure and encouraging commonhold and other forms of collective ownership. Political statements and white paper material in 2025 indicate an appetite to support commonhold, professionalise managing agents and reduce the scope for leasehold exploitation. Over time, if commonhold becomes mortgageable and better understood, the long-term structure of the housing market could change substantially: developers selling flats may adopt commonhold for new developments; investors will adjust to fewer leasehold revenue opportunities; and leaseholders will expect greater control over building governance. That is a multi-year project requiring lender buy-in and cultural change, but the 2024 Act is an important stepping stone.

Conclusion
The Leasehold and Freehold Reform Act 2024 restructures fundamental aspects of property tenure in England and Wales. In 2025 the Act is both a statement of intent and an evolving reality: the removal of the two-year ownership rule (commenced 31 January 2025) is already reshaping conveyancing dynamics, while the biggest financial consequences — 990-year extensions, abolition of marriage value, ground rent buy-outs and changes to service charge transparency — hinge on secondary legislation yet to be fully rolled out. Owners, investors, developers and professional advisers should therefore take a two-track approach: act where clear rights are already in force, and prepare for substantial revaluation and operational change once the detailed rules crystallise. Specialist legal and valuation advice is essential in the transition: the headline direction is clear, but the arithmetic that determines how much money changes hands is still being set.

Five frequently asked questions
Q1 — Is the Leasehold and Freehold Reform Act 2024 fully in force now?
No. The Act received Royal Assent in May 2024 but has been brought into force in stages; a key provision (removal of the two-year ownership requirement) came into force on 31 January 2025. Many important measures require secondary regulations and further commencement orders before they will be operable in day-to-day transactions.

Q2 —Will it be cheaper to extend my lease?
Probably — particularly if your lease is below 80 years. The abolition or curtailment of marriage value and the new statutory extension model (990 years at a peppercorn) are designed to reduce premiums in many cases. The precise saving depends on the final valuation rules and your lease specifics, so get specialist advice.

Q3 —If I buy a lease now, can I apply to extend immediately?
Because the two-year rule was removed by the 31 January 2025 commencement, many purchasers can now apply immediately. But whether that application will be governed by the old calculation rules or the new ones depends on the detailed transitional regulations; instruct a conveyancer to confirm the current position for your purchase.

Q4 —How will developers replace ground rent revenue?
Developers are likely to lean on service contracts, management company structures, or stewardship models that provide predictable long-term income without relying on traditional ground rents. Reworking appraisal and sales documentation is essential. Many developers will also prioritise selling freehold houses and explore alternative ways to capture long-term value (for example, commercial strips, retained freeholds for communal facilities or management fees).

Q5 —Are we likely to see more government action after the Act?
Yes. Ministers and housing officials have signalled ongoing consultations and further legislation aimed at professionalising the property management sector, increasing transparency and encouraging commonhold. Expect further statutory instruments, consultations in 2025 and potentially additional primary legislation over the next parliamentary session.

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