Probate and Will, Trust & Estate Disputes

Publish date

21 January 2021

Leasehold Reforms – what do the latest announcements mean for leaseholders?

On 7 January 2021, the Secretary of State for Housing, Communities and Local Government, Robert Jenrick, announced that the Government is planning legislation which will allow leaseholders to extend their lease to a new standard of 990 years with zero ground rent.

These latest plans follow the series of reports on leasehold enfranchisement published by the Law Commission including the July 2020 report which called for significant reform of the leasehold system.These included a host of recommended changes to the law, intended to reduce the number of new houses sold on a leasehold basis, empower leaseholders to take control of their property, and encourage commonhold as an alternative to leasehold ownership.

The Housing Secretary’s announcement is for now just a press release and the proposed reforms may not be passed as law for some time. His statement, whilst undoubtedly welcomed by leaseholders, lacks detail required to advise leaseholders on how these reforms will be implemented in practice.

In addition to extending leases by 990 with a zero ground rent, the Housing Secretary has also announced that the valuation process for calculating the premium payable for a lease extension is to be simplified, and an online calculator will give an indication of the price a leaseholder should expect to pay.

We will have to wait and see the final detail of the changes to the valuation process and what impact the new valuation regime will have on the cost of lease extensions.

The most recent proposals also include (but have yet to be expanded on):

  • Abolishing costs such as “marriage value” – a fee based on the increase in the value of the property once the lease has been extended. This additional compensation currently payable to a freeholder where for example a lease of a flat has less than 80 years unexpired, can form a significant part of a premium calculation. It remains to be seen if there will be a replacement of this element to fully compensate freeholders.
  • Fairness and transparency of rates for calculating the costs of a lease extension or freehold purchase.
  • A cap on the ground rent which is payable when a leaseholder becomes the freeholder.
  • The Government is also keen to afford further protection for those buying leasehold retirement properties.
  • The reforms also include recommendations for commonhold to become a standard alternative to leasehold, allowing flat owners to own their properties on a freehold basis and give them the right to joint ownership and management of a block of flats

Whilst we now have a clearer idea of the Government’s intentions, we will need to wait for more details of how this proposed framework will operate, and the impact these reforms will have on the leasehold sector going forward.

Until then, it is important to remember that the value of a property is reliant upon the length of a lease. As such it may be that a leaseholder is better placed to extend the lease now rather than wait for the new 990 year extension and possible removal of the expensive marriage value.

We are here to help.  Our solicitors have experience advising both tenants and landlords on all aspects of the enfranchisement process from our offices in Tunbridge Wells and Dartford.

Our dedicated team consists of lawyers across several departments and we are able to provide a complete tailored service to meet the needs of leasehold and freehold clients.   We have close working relationships with many valuers who are able to provide our clients with advice and guidance on valuation issues.

For further information, please speak to one of the team.

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