The passage of the Bill into law changes nothing in the short-to-medium term.  It does not change how valuations are to be carried out, nor does it abolish marriage value – it merely sets out the framework for the implementation of secondary legislation aimed at bringing about the headline changes such as the abolition of marriage value, and the introduction of 990-year lease extensions.  According to the National Residential Landlords Association, “there is likely to be further consultation before implementation and leaseholders should probably not expect the Act to apply to them until 2025/26”.  This ties in with my understanding of the situation, as well as comments made to me by Labour Party insiders that “Leasehold Reform is not likely to be high on the list of priorities”.

Assuming that the reforms eventually come into force in their promised state, they will serve to make enfranchisement cheaper, won’t they?

Not necessarily…

Although, based on the current enfranchisement calculation, the removal of marriage value would make the enfranchisement of leases under 80 years cheaper, the devil will be very much in the detail.

Within the very depths of the Act, Schedule 5, Section 27, Paragraphs 8-10 sets out that the Deferment Rate is to be set by the Secretary of State, and is to be reviewed every ten years.  Without getting into too much detail on the deferment rate (link to separate article here), a downward adjustment to the rate would serve to negate the savings made by the removal of marriage value, and could even serve to make enfranchisement more expensive for leases with greater than 80 years remaining.

Let’s take a look at some examples…

Take two identical flats, each with a long leasehold value of £200,000.  No ground rent is payable under either lease.  Flat A has 50 years remaining on its lease, whilst Flat B has 100 years remaining on its lease.  The below table shows how the cost of enfranchisement would change in various scenarios: