Skip to Main content

Search results for ''...


Sorry, there were no results

Newsletter Sign Up

I would like to receive newsletters, event invitations and publications from Thomson Snell & Passmore by email on the following topics (tick all those that apply) and consent for my data to be processed for this purpose.

We respect your privacy and want news to be relevant. To either, click here or update your preferences by emailing us at info@ts-p.co.uk. Your personal data shall be treated in accordance with our & .

Get In Touch

By submitting an enquiry through 'get in touch' your data will only be used to contact you regarding your enquiry. If you would like to receive newsletters from Thomson Snell & Passmore please use the separate form below.

Newsletter Sign Up

I would like to receive newsletters, event invitations and publications from Thomson Snell & Passmore by email on the following topics (tick all those that apply) and consent for my data to be processed for this purpose.

We respect your privacy and want news to be relevant. To either, click here or update your preferences by emailing us at info@ts-p.co.uk. Your personal data shall be treated in accordance with our & .

Get In Touch

By submitting an enquiry through 'get in touch' your data will only be used to contact you regarding your enquiry. If you would like to receive newsletters from Thomson Snell & Passmore please use the separate form below.

  • Overview

    On 9 January 2020, the Law Commission published its report on the options for reducing the costs payable by leaseholders extending their leases or purchasing the freeholds of their properties. The report is focuses on the premium payable by leaseholders to freeholders when they extend a lease or acquire a freehold, but also touches on other costs payable by leaseholders, such as professional fees.

    The biggest changes proposed are to the method of calculating the premium. Three ‘schemes’ have been proposed, with differences in the treatment of ‘marriage value’ and ‘hope value’.

    A freehold which is not subject to a lease is usually worth more than the combined value of a freehold which is subject to a lease, and the value of that lease itself. This is because when the freehold and the leasehold are in the same ownership, the owner has greater freedom over their use of the property than either a leaseholder or a freeholder subject to a lease. The difference between the two values is known as marriage value. A freeholder selling their freehold to a leaseholder will be able to charge a higher sum to reflect the additional value realised by the leaseholder. A freeholder selling to a third party will not be able to charge as high a sum, but may charge some uplift, to reflect the fact that the third party might some day be able to sell to the leaseholder and charge marriage value at that stage. This is known as ‘hope value’.

    1. Under the first scheme, both marriage value and hope value are disregarded. The valuation is worked out by adding together the ground rent that would be paid during the remainder of the term (less a reduction to account for the landlord getting the money up front) and the value of the interest being purchased (either the extended lease term, or the freehold).
    2. Under the second scheme, the calculation includes the ground rent, plus the value of the interest being purchased, plus ‘hope value’. Marriage value is excluded.
    3. Under the third scheme, the calculation includes the ground rent, the value of the interest being purchase and marriage value.

     

    Schemes 1 & 2 will reduce the premium payable. Scheme 3 is the existing method of calculating the premium.

    The report also raises the possibility of other changes to the leasehold system. The possible changes likely to have the biggest impact are:

    1. Prescribing the rates used to calculate the value of the interest purchased, the value of the ground rents, marriage value and hope value. This would significantly simplify the valuation process and reduce professional costs and risk of litigation, but risks a ‘one-size-fits-all’ approach which does not accurately reflect the value of freeholders’ interests.
    2. Capping ground rents. Onerous ground rents have been in the news frequently and the report proposes that when a premium is calculated, the value of the ground rents could be capped to 0.1% of the freehold’s value.
    3. Enabling leaseholders to avoid paying ‘development value’ for any potential development of the freehold they are acquiring. While this would reduce the premium payable, it makes further development of those properties more difficult, potentially removing a source of future housing.

     

    The report does not recommend which of the above options the Government should progress, but it is clear that any of the major changes are likely to reduce the premiums payable, reducing the value of freeholders’ investments. Further reports from the Law Commission with more possible reforms to the leasehold system are due in the next few months.

  • Related Services

    Residential Conveyancing

    We have one of the largest and most experienced property teams in the South East, based in Tunbridge Wells we deal exclusively in residential conveyancing.

    Dispute Resolution

    Our team of experienced and highly specialist lawyers includes experts in contractual, commercial and international disputes, insolvency, shareholders’, directors and partnership disputes, in disputes arising from construction/engineering projects and we also act for clients seeking to protect or defend intellectual property/IT rights.

    Property disputes including landlord & tenant and boundary disputes

    We represent clients in all forums including the High Court and County Court, Lands Tribunal, and the First-Tier Tribunal (Property Chamber).  All of our property specialists are members of the Property Litigation Association and we have strong working relationships with specialist surveyors and experts, as well as Chancery barristers. Above all, we recognise that the property world is a business in which personal relationships count and we fully address the human as well as the legal dimension of any problem.

Newsletter Sign Up

I would like to receive newsletters, event invitations and publications from Thomson Snell & Passmore by email on the following topics (tick all those that apply) and consent for my data to be processed for this purpose.

We respect your privacy and want news to be relevant. To either, click here or update your preferences by emailing us at info@ts-p.co.uk. Your personal data shall be treated in accordance with our & .

Get In Touch

By submitting an enquiry through 'get in touch' your data will only be used to contact you regarding your enquiry. If you would like to receive newsletters from Thomson Snell & Passmore please use the separate form below.

^
Jargon Buster