Leasehold reform update

You might recall at the end of January, we brought you an update on which of the hotly anticipated leasehold reforms had started to come into effect, namely the abolition of the two year rule. In that update, we promised more to come and sure enough, here they are.

From 3 March 2025 we have seen two more significant changes to the law as it stood. These changes are with regard to the process in which leaseholders can undertake the Right to Manage (RTM) of their building:

1. Leaseholders who live in mixed-use buildings (those made up of both residential and commercial elements) will now be able to exercise the RTM with a non-residential portion of 50% of the floor space of the building.  This is a marked increase from the previous threshold of 25% and will likely see a significant increase the number of properties where RTM may be utilised;
2. Leaseholders who are making an RTM claim will now also no longer be required to cover their landlord’s legal costs when making an RTM claim. This is unless the RTM claim notice is withdrawn or ceases to have effect.

These reforms are coming into force a little earlier than initially expected and surprisingly, without including the similar provisions to the collective enfranchisement reforms which were also set out in the new Act. Those reforms included similar amendments to the non-residential element for collective claims, also going from 25% to 50% and including similar changes to the costs position. This is likely due to the ongoing consultations taking place regarding the collective enfranchisement process which is why it is so surprising that the RTM amends have come through so early. As ever, we continue wait and see how and when the reforms will come in to effect and what this will look for our industry.

How we can help

The real estate team advises on all aspects of leasehold and property law.  If you would like further guidance on statutory reforms or any other aspect of this complex area of law, please get in touch.