Homeowners who have recently purchased a flat can now extend their leases without delay, following a landmark legal reform aimed at easing leasehold burdens.
Previously, leaseholders had to wait two years before applying for a lease extension. However, under the new law, this restriction has been abolished, allowing property owners to secure the long-term value of their homes immediately. The change is part of the Government’s wider overhaul of leasehold and freehold regulations.
Significant Financial Benefits
Lease extensions are considered crucial for homeowners, as a diminishing lease term can reduce property value and make it harder to sell. The new law ensures that leaseholders applying for an extension will automatically receive a 990-year lease with a nominal, or “peppercorn,” ground rent—effectively eliminating any future ground rent obligations.
Mike Somekh, founder of the Freehold Collective, welcomed the change, describing it as a “much-needed relief” for leaseholders trapped in costly agreements.
“This could lead to a 15% increase in property value for those with fewer than 70 years left on their lease,” he said. “Removing the two-year waiting period means homeowners no longer have to pay inflated costs for lease extensions while still covering ground rent.”
Mortgage eligibility is also expected to improve. Many lenders refuse to provide loans on properties with shorter lease terms, meaning buyers previously faced significant hurdles when trying to secure financing.
Abolishing the Two-Year Rule
The original purpose of the two-year restriction was to prevent speculative investors from buying short-lease properties, extending them, and selling them at a profit. However, in practice, it left many ordinary homeowners trapped, unable to extend their leases in a timely manner and facing escalating costs.
“For years, buyers and sellers had to use a complex workaround where the seller initiated the lease extension process before the sale, allowing the buyer to inherit the right,” Somekh explained. “This added unnecessary costs and often led to sales falling through.”
With the rule now scrapped, tens of thousands of leaseholders will be able to extend their leases as soon as they purchase their property.
Remaining Challenges
Despite the positive changes, Somekh warned that leaseholders still face difficulties due to delays at the Land Registry. One of the key requirements for a lease extension is proving ownership, but processing times have increased dramatically.
“Registrations that used to take 2-4 weeks can now take more than two years,” he said. “This is a major issue, especially given that Land Registry fees have recently risen by 233%.”
While the abolition of the two-year rule is seen as a major step forward, campaigners continue to call for further leasehold reforms. The Government has pledged to make homeownership more affordable and less complex, though challenges remain in fully addressing leasehold-related concerns.
