Leasehold Reform Explained: What Landlords Need To Know

In 2023, around 4.77 million homes in England and Wales were leasehold, which was about 19% of England’s housing stock at the time. That’s a pretty big slice of the housing market. 

But if you’ve ever dealt with leaseholds yourself, you’ll know they can come with their share of issues. Things like soaring ground rents, tricky lease extensions, and confusing small print have long been pain points for leaseholders and landlords alike.

This has been on the government’s radar for a while now, which is why they recently introduced the Leasehold and Freehold Reform Act 2024. This is a new set of rules designed to make things a bit fairer and more straightforward.

So, what does this mean if you’re a landlord? Well, if you own a leasehold flat or rent out a place in a block where the freeholder calls the shots, these changes could have an impact on how you manage your properties (and your costs).

Keep scrolling for a breakdown of what the latest leasehold reform means for landlords in practical terms, what’s changing, and what steps you might want to take next. 

What Is Leasehold and Why Has It Been Reformed?

To start with, let’s go through what leasehold means. If you own a leasehold property, you own the property itself but not the land it sits on. The land, and often the building too, is owned by the freeholder. The leaseholder (that’s either you or your tenant) usually pays ground rent, service charges, and other costs to the freeholder for building maintenance, insurance, and such. 

Sounds simple enough… but in practice, the leasehold system has brought with it a lot of problems. Historically, leaseholders have found themselves locked into contracts with ground rents that double every few years (making the property hard to sell), as well as huge bills for service charges and maintenance. These changes are often implemented without transparency. To make matters worse, the processes for extending leases or buying the freehold are almost always long-winded and complex. 

This has caused no end of frustration for leaseholders. It has also made life harder for landlords with leasehold buy-to-lets.

The government has been promising change for years, and now, thanks to the Leasehold and Freehold Reform Act 2024, those changes are finally coming into motion. 

What Is Changing With The Leasehold Reform Bill? 

Let’s dig into the nuts and bolts of the leasehold reform. 

Here’s a snapshot of what the leasehold reform is looking to sort out:

• Ending escalating ground rents on new leases (already mostly tackled by the Ground Rent Act 2022, but this builds on it).
• Making it easier and cheaper to extend a lease: The extension period will now be 990 years for both flats and houses (up from 90 and 50 years respectively).
• Simplifying the process of buying the freehold (known as enfranchisement) for leaseholders.
• More transparency on service charges: Landlords and freeholders will need to provide clearer billing and reasoning for any rises. 
• New rights for leaseholders - to challenge unfair costs or poor management.

If you’re a freeholder of leasehold flats or you own leasehold rental properties, this will likely change how you manage your investments, as it affects how much flexibility you have in the future.

What Impact Will The Leasehold Reform Have On Landlords? 

A lot of leasehold legislation is written with homeowners in mind. But if you’re a landlord, these changes can still impact your portfolio. Especially if you’re renting out leasehold flats or you’re the freeholder in an HMO or apartment block.

Impact Of Lease Extension Changes

Perhaps the biggest change is that lease extensions are set to become easier and cheaper for leaseholders. Under the new plans, leaseholders have the right to extend their lease by 990 years. That’s up from the current 90 years for flats and 50 years for houses. The idea here is to get rid of the cycle of leaseholders having to negotiate and pay for multiple extensions over time.

For landlords who own flats on a leasehold basis, this is well worth knowing. A short lease can seriously dent your property’s market value. And even make it hard to remortgage. Banks tend to get twitchy about lending on leases under 80 years, so having a route to easy, affordable extensions is likely to make your life a lot simpler when it comes to selling or refinancing.

Impact Of Extension Costs Rework

The reforms are also expected to simplify how extension costs are calculated. The government plans to scrap some of the fiddlier elements, like "marriage value". That’s the extra premium leaseholders have to pay when the lease drops below 80 years. 

The removal of marriage value should, in theory, bring down the overall cost of extending a lease, although the final details on pricing structures are still being ironed out.

The reform also confirms that ground rents on new long leases will be set to zero. While this change hasn’t wiped out ground rent on existing leases just yet, it does signal a shift. And with the government under continued pressure to address older agreements, further changes here wouldn’t be surprising.

Impact Of Ground Rent Changes

The ground rent conversation has been rumbling on for years, but the government has now made a clear move: ground rents on new long leases will be set at a peppercorn (that is, effectively zero). This part of the reform already kicked in for new leases from June 2022 under the Leasehold Reform (Ground Rent) Act 2022.

If you’re involved in granting new long leases or thinking about adding new-build flats to your portfolio, this means you can no longer charge ground rent on those leases. 

For existing leases, there’s no automatic change just yet, but campaigners and MPs continue to push for a cap or abolition of ground rent on older agreements, too.

While this might mean a reduction in ongoing income if you’re a freeholder, it does align with the general direction of travel toward a system that many argue is fairer for leaseholders. Plus, leasehold properties without ground rent attached tend to be easier to sell and mortgage, so there’s that upside to factor in too.

Impact Of Changes To Service Charges

Another big part of leasehold reform focuses on service charges, making them a bit less of a grey area. Leaseholders have been complaining about unclear or inflated service charge bills for decades now. The government is now finally realising it needs to make it easier for them to challenge these costs.

So, what does that mean if you’re a freeholder or managing a block of leasehold flats?

Expect your tenants (or their solicitors) to start asking more questions. Leaseholders will have stronger rights to request detailed breakdowns of service charges and dispute anything that doesn’t seem reasonable. 

There’s also talk of a standardised format for service charge invoices, which could make comparisons between blocks a whole lot easier for tenants, and potentially highlight where costs are out of step.

If you're managing a multi-unit property, now’s a smart time to review how you handle service charges and make sure your records are watertight. Clear, transparent accounting is going to be more important than ever. 

Tools like Landlord Studio can make this a lot easier, giving you a central place to track service charge breakdowns, store key documents, and set reminders for important dates. With everything organised and at your fingertips, you're ready to respond quickly if a tenant queries costs. And you’re far less likely to be caught out by the new leasehold rules.

Does Leasehold Reform Apply to Landlords Who Own Flats?

Another burning question landlords have is whether leasehold reform applies to those who own flats. The simple answer is yes. 

If you’re a landlord with a leasehold flat, these changes still affect you. The reform makes it easier and cheaper for leaseholders (including landlord-owners) to extend their leases by up to 990 years. 

But why does that matter? Well, a longer lease typically means a higher property value and fewer issues with mortgage lenders. Especially once your lease dips below 80 years. Even if you’re holding onto the property long-term, extending the lease now could save you a significant amount compared to if you leave it until crunch time. 

What About Landlords Who Own the Freehold?

If you’re a freeholder of a block or are thinking about buying a freehold, leasehold reform could make things a bit more complicated. 

One key change is that leaseholders will find it easier to club together and buy out the freehold through collective enfranchisement. You might also see more leaseholders challenging service charges or management fees, with extra rights to question costs. 

You can avoid these issues by making sure your service charge accounts are clear and that your invoicing is well-documented. Good bookkeeping is the name of the game. If you keep all of this in order, you’ll be prepared when leaseholders start asking awkward questions.

Will Existing Lease Agreements Be Affected?

At the moment, leasehold reform mostly targets new leases, especially when it comes to scrapping ground rent charges. Existing lease agreements don’t automatically change overnight. With that said, if your current tenant decides to extend their lease under the new rules, the ground rent could be set to zero as part of the deal. 

There’s also political pressure for the government to go further in tackling ground rents across the board, so watch this space.

Staying Ahead Of The Game

Leasehold reform is having a tangible impact on the way landlords and leaseholders interact.  And while the changes might feel like yet another thing to juggle, staying ahead of the curve is the best approach to save you work down the line. 

Get your paperwork in order, keep your tenant comms clear, and make sure your processes are up to scratch. And if you’re looking for an easy way to stay on top of it all, Landlord Studio can help you manage your property docs, track expenses, and handle reminders - so you can focus on the bigger picture, not the admin.

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FAQs on Leasehold Reform for Landlords

Do I still need to collect ground rent on existing leases?
Yes, unless your tenant extends the lease under the new rules (which would wipe out the ground rent).

Can my leaseholder tenants force me to sell the freehold?
If enough of them band together and meet the legal requirements for collective enfranchisement, yes. Though the process involves valuation and negotiation.

What if I want to extend the lease on my rental flat?
You can! And thanks to the reform, it should now be cheaper and simpler, with up to a 990-year extension possible.