Leasehold Reform – Where are we now?

The first tranche of legislation came into force on 30th June 2022 in the form of the Leasehold Reform (Ground Rent) Act 2022, which has effectively banned new ground rents going forward, as well as prohibiting new or amended ground rents being applied as part of an informal lease extension.

With the first steps having been achieved, focus now turns to the remaining commitments outlined in the announcement from January 2021, namely:

1. The abolition of Marriage Value
2. The simplification and standardisation of the valuation process, potentially through the introduction of an online calculator
3. The capping of ground rents at 0.1% of the freehold value for the purposes of enfranchisement calculations
4. Allowing leaseholders to extend their lease to a much longer term of 990 years
5. Enabling leaseholders already subject to long leases to buy out ground rents without having to extend the term of their lease

Whilst very little mention of such leasehold reforms was made in the 2022 Queen’s Speech, on 10th May 2022, the Minister later suggested in June 2022 that legislation would be introduced in the 2023-24 parliamentary session.

Much has changed since then, however, with the UK having experienced two new Prime Ministers and their respective governments, and the current regime having made no comments as to their policies, or whether they feel bound by the commitments and policies of the Johnson administration.

Whilst, in recent months, Baroness Scott of Bybrook has reaffirmed the Government’s commitment to leasehold reform in a statement to the House of Lords, no specific commitment has been made, and it may well be that any future legislation may appear in a different guise to that which was previously promised.

I would suggest that, should any deviation from the promises be made, the abolition of Marriage Value may present the most appealing prospect for the watering-down of the original plans.

It is clear that an outright removal of Marriage Value would severely diminish the value of freeholders’ property holdings (Marriage Value on a £200k flat with 50 years remaining on the lease could be worth in the region of £30,000), and freeholders have already put the government on notice that any such action would be swiftly met by a challenge under Article 1 of the Human Rights Act (peaceful enjoyment of possessions).

This may have been a fight that a previous administration would have seen as but a small bump in the road towards reform. However, given the severe lack of political capital currently present in Whitehall, it may well be that the Government feels the need to be more selective in choosing its battles.

The disappointing fact of the matter is that we are clearly still some distance from discovering the finer details of these reforms, let alone their coming into force as primary legislation.

Whilst the form and timescale of such reforms is still unknown, I believe that it would be a risky proposition to hold off on extending one’s lease in the hope that things may be made easier/cheaper in an unspecified manner at an unspecified point in the future.

Therefore, I would advise anyone thinking of extending their lease to do so ASAP in order to protect the value of their property, and to avoid the risk of the process being more expensive further down the line.

If you have not considered extending your lease, and you have less than 90 years remaining, now is the perfect time to invest in protecting the value of your property.

With 90 years unexpired, it would cost approximately £5,000 to extend the lease of the previously-mentioned £200k flat; ten years down the line, this cost will have almost tripled to £14,000.

For further information, please contact James on j.laughlin@watsons-property.co.uk.
To discuss extending your lease, please contact our Customer Services Team on 01603 751577 or email: survey@watsons-property.co.uk