LEASHOLD REFORM : THE ABOLITION OF THE 2-YEAR OWNERSHIP RULE
On 23 January 2025, Matthew Pennycook MP announced a landmark change in leasehold law: the abolition of the two-year ownership rule. This takes effect from 31 January 2025 and removes the requirement for leaseholders to wait two years before they can extend their lease.
A Long-Awaited Change for Leaseholders
Previously, leaseholders had to either wait two years after purchasing their property or go through the process of having the seller exercise their right and assign it to them upon completion. This added unnecessary expense, paperwork, and delays to the system.
The removal of this rule means that leaseholders can now exercise their rights from the moment they take ownership of their property. This eliminates the need to negotiate lease extensions through a seller and removes the risk of losing crucial rights due to changes in ownership. For instance, under the old system, if a leaseholder had owned a property for over two years but later added a partner to the title, the new ownership structure would reset the clock, forcing them to wait another two years before being eligible for a lease extension or freehold purchase. With the new rule, such obstacles are now a thing of the past.
Addressing the Registration Gap Issue
While this reform is a welcome change, it does not come without challenges. One significant issue is the registration gap—the delay between purchasing a property and being officially registered as the legal owner at HM Land Registry. Due to current backlogs, some leaseholders can face delays before their ownership is formally recorded.
To address this, leaseholders waiting for registration can request expedited processing from HM Land Registry. If approved, the title update should be completed within 10 working days. However, this is not always a guaranteed solution, as priority periods and requisitions may still cause delays.
As an alternative, leaseholders who do not wish to wait for registration can have the seller serve a statutory lease extension notice before completion, with the benefit assigned to them upon transfer of ownership. This ensures their right to extend is preserved despite registration delays.
Benefits for Sellers of Flats with Short Leases
This reform is also a major advantage for those looking to sell flats with short leases. Previously, prospective buyers were often deterred by the requirement to wait two years before extending the lease, making short-lease properties harder to sell and reducing their market value. Now, sellers can market their flats more confidently, knowing that buyers can immediately extend the lease upon purchase. This change is likely to improve liquidity in the market for leasehold properties, making transactions smoother and increasing demand for shorter-lease properties.
A Positive Change with Minimal Impact on Freeholders
While some may wonder whether this change disadvantages freeholders, the reality is that it only removes unnecessary procedural steps. Under the previous system, leaseholders’ rights to extend their lease or buy their freehold were already assignable, meaning a seller could serve notice and transfer this right to a buyer. The new rule simply removes this extra layer of administration, making the process more efficient for all parties involved.
Why Choose Austin Gray Surveyors for Your Lease Extension or Short Lease Sale?
At Austin Gray Surveyors, we are experts in leasehold property matters and can guide you through the lease extension process with ease and efficiency. Whether you’re looking to extend your lease or sell your short lease flat at auction, our team offers trusted, professional advice tailored to your specific needs. We specialise in selling short lease properties at auction, helping you achieve the best possible price in a competitive market. With our extensive experience, we ensure a smooth, transparent process from start to finish. Don’t navigate the complexities of leasehold law alone—contact us today on 01273 201980 to discuss your options and let our experienced team make the process simple for you.
