Leasehold Reform in 2024

May 2024 Update:

Following Rishi Sunak’s surprise General Election announcement, the The Leasehold and Freehold Reform Act made it it through the ‘wash up’ and became law on 24 May 2024 stating “The Act will make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats”.

Excellent news for leaseholders with (yet another) catch. For the time being, nothing about the process and valuation has changed. A claim on the 24th May attracts the exact same cost as one the day before and whilst it is very much a step in the right direction, it will take secondary legislation to make the substantial changes to ground rent and the removal of marriage value, that will see leaseholders pay considerably less. This is estimated to take a further 2-3 years.

April 2024 Update:

The Tory Government had ditches a manifesto pledge to reduce ground rents to zero, which was one of the options on the table for leasehold reform.

Whilst this still leaves the 0.1% option on the table the door is now open for the Leasehold Reform Bill to be watered down further perhaps scrapped, as Michael Gove said would happen in early 2023 (prior to it being resurrected by the end of the year).

As of February 2024, the following is known:

• The Government plans to implement new legislation during the course of 2024 with the intention of making lease extensions and freehold purchases easier and more affordable for leaseholders. A draft Bill has been produced, and has been through readings in the house of commons.
• In terms of the effect on premiums, the most significant impact will be the eradication of marriage value compensation (which effects leases with current unexpired terms of under 80 years), and the capping of ground rent for the purpose of the calculation at 0.1% of the capital value of the property (which effects leases with high levels of ground rent). Other lease extensions and freehold purchases may be affected by the proposal to prescribe the interest rates by which the current values of the ground rent and reversion are assessed. We think the extent of any change in this regard is likely to be less significant, but this will depend on what rates are prescribed.
• Additionally there are proposed changes to the way in which the freeholder’s costs for dealing with the lease extensions or freehold purchases (most of which are currently payable by the leaseholder) are dealt with, which ought to be beneficial to leaseholders.
• At this time we do not know whether the Bill will be passed in its current form, or whether changes may be made by parliament.  If the Bill is passed it may be subject to legal challenges by freeholders with significant vested interests. It is therefore not possible for us to confirm what the impact of the legislation will be on any individual case.
• General information and updates are published on the Leasehold Advisory Service website

New clients coming to us in 2024 look to have an advantage over those extending or buying their freeholds in previous years, as they can serve a S42 or S13 notice, and see how reform progresses over the course of the year (a typical claim takes 9-12 months from start to finish).

Those on 80+ year leases and ‘normal’ ground rents, will likely only have the issue of freeholder’s costs to gain, as the proposals target marriage value and high rents.

Whilst we will never be able to advise a client on what they should do, all Peter Barry reports now also conclude what premium the client can expect if the reforms pass in their current form (which can halve the premium payable for leases sub 80 years).

If you are interested in extending our services, either phone or email us and we will be happy to help.