Lease Extension Update: 2-year Rule is Scrapped

Housing has always been at the heart of the Labour manifesto and the Government has wasted no time in making changes. While rental reforms await Royal Assent, the Housing Minister has turned his attention to the leasehold sector.

New for 2025: lease extension made easier

The 31^st January 2025 saw the first big leasehold change for many years. The two-year lease extension rule was abolished. In the past, a leaseholder had to own a property for at least two years before they could apply to extend the lease. Now, any purchaser of a leasehold property can request to extend the lease from the first day of ownership.

Excellent news for leasehold properties

Properties with short leases – those with less than 80-years left – have been previously overlooked as many buyers don’t want to wait two years to extend the lease. Purchasers now have more confidence when offering on a leasehold property, making these homes more attractive.

That said, the change in law does not allow a purchaser to extend a lease before they have completed on the purchase. As it stands, extending the lease falls to the incumbent leaseholder. When a leasehold property with less than 80 years left on the lease is marketed, a buyer would still need to work with a mortgage lender who specialises in the purchase of short lease properties, or purchase with cash.

Leasehold values could start rising

With the Government making all the right noises that leasehold reforms will gather pace from now, thoughts turn to how this could affect leasehold property values. In 2023, when the former Government first announced it was to overhaul the leasehold system, there were suggestions that reforms could increase the value of leasehold properties by 10%. White & Brook’s will be monitoring leasehold values over the coming months as change takes effect.

Reforms to watch out for

While the abolishment of the two-year rule is a step in the right direction, leaseholders will want to know how the valuation process may be reformed and whether marriage value will be scrapped. If the Government is true to its word, the process of extending a lease or buying the freehold will become easier and much cheaper soon.

Where are we with wider leasehold reforms?

One thing the previous and current Government agree on are the disadvantages of the leasehold system. The Conservative Government managed to pass its Leasehold and Freehold Reform Bill before it was ousted, although its contents were not enforced.

The current Labour Government has now started to introduce some of the Act’s contents – the abolishment of the two-year rule one of the first. The Housing Minister said additional leasehold reforms will come ‘at pace’ this year, with the Government cherry picking laws that will have the most impact.

It’s worth noting the buck doesn’t stop with the current Act. Labour would like leasehold reforms to go further, therefore it is expected to publish a new draft Leasehold and Commonhold Reform Bill, together with an associated White Paper, later in 2025.

White & Brooks would be happy to explain the intricacies of the leasehold system to anyone who is thinking of buying a leasehold property. We can talk you through the process of extending a lease, demystify marriage value and clarify how leases are currently valued. Please contact your local branch for advice.