A recurring theme from my discussions with leaseholders, when it comes to Enfranchisement, is the suggestion that they may find themselves better off by waiting to take action, believing that their lease extension or freehold purchase will become cheaper in the not-too-distant future as a result of the Government’s proposed reforms to the Enfranchisement process.
Whilst the proposals to reduce the cost of Enfranchisement may appear appealing at face value, I believe that we are still only at the beginning of what could be a long, drawn-out process, which could take years to complete. Indeed, it is even possible that the reforms may not happen or, if they do, could come into force in a very different form to that originally set out by the Government back in 2021.
As a result, I believe that there are at least three good reasons why leaseholders who are looking to either extend their lease or purchase their freehold should act now, rather than waiting an undetermined length of time for unspecified reforms that may not even serve to benefit them.
You have more than 80 years on your lease
Unless there are drastic, and as yet unannounced, changes to the proposed reforms, leaseholders with leases with in excess of 80 years unexpired will see no benefit from any future changes to the law.
In particular, any future abolition of marriage value will only impact leases with less than 80 years remaining.
If you fall into this category, waiting to either extend your lease or purchase your freehold will only serve to increase the price that you will pay.
Reform may still be years away (or may not even happen)
If we can guarantee only one thing about government – it’s that it’s glacially slow
It is well known that the wheels of government move at a glacial pace. The original announcement concerning reform was made back in January 2021, and we have yet to see any further progress made. Indeed, the Government has yet to even put any meat on the bones and let us know precisely what these reforms will look like.
Based on the recent announcement that the next King’s Speech will take place on 7th November 2023, it is likely that we have at least three more months to wait until we get to find out whether reforms will be included in next years’ legislative programme and, if so, what form they will take?
An added complication is the upcoming General Election in late 2024, at which it is highly likely that there will be a change of government. If this happens before any proposed reforms are put into law, it will be down to the new government to decide whether they wish to proceed with matters tabled by the outgoing government and, if so, what form they will take and what degree of priority will be afforded to them.
I would be highly surprised if the current government manages to bring about meaningful reform by the next General Election, at which point we have no idea whether the next government will choose to continue with any such reforms.
Reform will likely be watered down
“See you in Strasbourg!”
This is the big one.
Even if the King’s Speech brings about a positive announcement, brimming with detail, and the Government chooses to put the reforms into law at lightning pace, I can all but guarantee that the very simple objective ‘to abolish marriage value‘ will prove anything but simple in its implementation.
Large freeholders have already signaled their intention to utilise the European Court of Human Rights (ECHR) to challenge any attempt to water down the value of their freeholds, which is precisely what the abolition of marriage value would do.
Let us not forget that such a move would not only impact multi-millionaire freeholders, but also the pension funds which choose to purchase freeholds as a solid investment with a reasonable rate of return. If any reform of leasehold were to damage the value of pension investments, the impact could be catastrophic and would probably amount to political suicide for the Party unwise enough to go through with such an act.
I would not be at all surprised if the devil is to be found in the details of the proposed reforms, if and when they are finally divulged to the general public. It could well be that the abolition of marriage value would only apply to leases that have not yet dropped into marriage value territory, meaning that those who have waited will find that the cost of Enfranchisement has gone up, rather than down. Alternatively, any loss to freeholders brought about by a wholesale abolition of marriage value could be made up by adjustments to deferment or capitalisation rates.
Don’t Wait – Enfranchise Today!
The answer, therefore, is simple. If you are wanting to extend your lease or purchase your freehold, the only way to guarantee that you’ll pay the best price is to take action today.
If you wait for proposed reforms that either never come, or appear in a different form to that which was promised, the only winner will be the freeholder who gets more money out of you than otherwise would have been the case.
James Laughlin LLB (Hons), PGDip, AssocRIC
Regional Area Surveyor – Leasehold
j.laughlin@watsons-property.co.uk
To find out how Watsons Property can save you money on your lease extension or freehold purchase, give me a call today on 01603 751577, or drop me a line at j.laughlin@watsons-property.co.uk
#TeamWatsons #marriagevalue #leaseextension #enfranchisement
