The Leasehold and Freehold Reform Act 2024 is one of the biggest shake‑ups of leasehold law in England and Wales in decades. It aims to cut costs for leaseholders, simplify lease extensions and make leasehold ownership fairer overall.
Importantly, many of its measures are being brought into force in stages. Before relying on any specific right (such as a new extension right), leaseholders should check whether that part of the Act is actually in force on the date of their transaction.
Key changes in the 2024 reforms
Under the 2024 reforms, statutory lease extensions for flats will move from 90 years to up to 990 years, with ground rent on those statutory extensions reduced to a peppercorn (essentially zero). The legislation also abolishes “marriage value” for statutory lease extensions and collective enfranchisement, removing a controversial extra cost that previously applied once leases fell below 80 years.
These reforms are designed to make lease extensions more attractive and less expensive over the long term. However, the detailed rules and the exact start dates for each element depend on further regulations and should be checked in each case.
Ground rent: why it matters
Ground rent is the annual sum you pay to your freeholder under the terms of your lease. In many older leases this started low but increases over time, sometimes doubling every 10 or 25 years or tracking inflation.
Those escalating clauses can cause serious problems. They can increase your outgoings, make your flat harder to sell, and can even affect mortgageability if a lender decides the ground rent is too high now or in the future.
What the 2022 Ground Rent Act already did
Since the Leasehold Reform (Ground Rent) Act 2022, the newest long residential leases must be granted at no more than a peppercorn ground rent. In practice, that means no meaningful financial ground rent can be charged on most new long leases granted after the Act came into force.
For existing leases, the position is different. The 2022 Act is not retrospective, so older leases keep their original terms, including any escalating ground rent clauses. Some lease extensions may still fall outside the 2022 regime depending on the structure of the transaction, which is one reason to avoid saying that absolutely every extended lease is covered.
Proposed £250 ground rent cap for existing leases
To address the remaining problem of high ground rents in older leases, the Government has brought forward a draft Commonhold and Leasehold Reform Bill. One
of its headline proposals is to cap ground rent for existing long residential leases at £250 per year, with a further step‑down to a peppercorn after a set period (for example 40 years).
This cap is not yet law. The Bill is still going through Parliament and the final details, including the level of the cap, who it applies to and when it will start, may change. It is not expected to take effect for several years, so leaseholders cannot rely on it today as if it were already in force.
If and when a statutory cap comes into force, it would override lease terms to the extent that they require ground rent above the legal limit. The lease wording itself would remain, but the freeholder’s ability to demand and enforce rent above the cap would be restricted by statute.
New‑build leases and developer restrictions
For most new‑build long residential leases, the position is now far stricter. Developers are generally no longer allowed to include a monetary ground rent at all and must instead grant leases at only a peppercorn ground rent.
Regulators, including the Competition and Markets Authority, have already taken action against historic practices such as doubling ground rent clauses. There is also ongoing scrutiny to ensure ground rent is not effectively reintroduced in disguise, for example through inflated administration fees or artificial service charges. Buyers of new‑build homes should not be asked to pay more than a peppercorn ground rent, whether openly or indirectly.
Do you still need a Deed of Variation?
The central question for many leaseholders is whether they need to act now about ground rent or simply wait for the new cap.
At the moment, your lease is binding as written unless it is formally changed or overridden by legislation that is actually in force. If your lease contains high or escalating ground rent and you want to change it now, the usual route is a Deed of Variation agreed with your freeholder. This is a legal document that alters the lease terms, often to reduce or remove ground rent.
In practice, this step is often driven by necessity:
- A buyer’s mortgage lender may refuse to lend unless the ground rent is capped or reduced.
- A buyer might pull out of a purchase if the ground rent terms look onerous.
- A remortgage might be blocked if the lender’s policy treats the ground rent as too high or unsafe.
If your property is already mortgaged, you will also need your lender’s consent to any Deed of Variation. This is because the lease forms part of the lender’s security, and changes to key terms affect their risk.
What happens when a cap becomes law?
If a statutory ground rent cap is eventually brought into force on the terms currently proposed, it should apply automatically to qualifying leases. Leaseholders paying more than the cap would benefit because any amount above the statutory limit would no longer be legally recoverable.
In that scenario, most leaseholders would not need a Deed of Variation solely to achieve the cap, because the law itself would restrict what the freeholder can demand. However:
Until the new law is actually in force, you must continue to comply with your current lease.
You should not assume any particular date (such as 2028) as guaranteed; start dates depend on Parliament and future regulations.
Should you act now or wait?
Whether you should pursue a Deed of Variation now or wait for future reforms depends on your situation:
Acting now may be sensible if you are selling, remortgaging, or your lease has very onerous ground rent terms that already cause problems.
Waiting may be reasonable if your ground rent is currently manageable, you have no immediate plans to sell or remortgage, and you are comfortable with the uncertainty over timings and details of the new laws.
The key is to balance:
- The cost and effort of negotiating and completing a variation now, against
- The risk and timing of future reforms and any impact on your property’s value and mortgageability in the meantime.
HOW LEWIS NEDAS LAW CAN HELP?
Lewis Nedas’ specialist leasehold solicitors can:
- Explain how the 2024 Act and the proposed new legislation apply to your specific lease.
- Review your ground rent clauses and advise on risk and marketability.
- Negotiate with your freeholder over a Deed of Variation or lease extension.
- Liaise with your mortgage lender to ensure any changes meet their requirements.
- Handle the formalities of completing and registering any variation or new lease.
Early advice can help you avoid lost sales, remortgage delays and unexpected costs, and can put you in the best position to benefit from current and future reforms.
Contact us via our website enquiries page or by telephone on 020 7367 2032