The latest leasehold reform announcement doesn’t quite provide the clarity the industry were hoping for…
The Government has announced a new set of reforms that it hopes will make it “easier and cheaper” for leaseholders to buy their homes, by extending their lease to 990 years with a zero ground rent.
A proposed cap will be put in place when a leaseholder applies to extend their lease, or purchase their freehold, and an online calculator will be brought in to make it simpler for leaseholder’s to find out how much it will cost to extend their leases.
The proposals include scrapping marriage value (which is the enhanced value attributable to lease extensions premiums for leases under 80 years unexpired) together with the ability for leaseholders to voluntarily restrict future development of their property to avoid paying development value.
It all sounds too good to be true, right? Wrong.
The announcement has thrown up more questions than it has answered and has left many leaseholders and landlords unsure of what to do next. My team and I have been inundated with questions from our clients about their next steps but, without any real detail coming from the Government, it is hard to speculate on what the impact will be for leaseholders and freeholders alike.
Our concerns are that many leaseholders will hold off applying to extend their leases whist they wait for the legislation to come into force, all the while their leasehold interests continue to depreciate. Other leaseholders may want to withdraw their current claims but for those who have less than 80 years unexpired, it could be considered too much of a risk as, under the current legislation, they will be statute barred from bringing another claim for a year. We will see this carry over into the new legislation? Given the Government’s willingness to help leaseholders, we cannot see that this would be a result but without the detail, it is impossible to know.
And what about freeholders who now risk having to dispose of their freehold reversions for less than market value? Without the inclusion of the complex calculations on marriage value, freeholders face the loss of billions of pounds worth of income. Our predictions are that freeholders will not take this lying down and we wait with baited breath to see what challenges will come of this.
Whilst the industry has welcomed the announcement, the detail remains to be seen. Leaseholders and freeholders have already been in limbo for years and the uncertainty surrounding implementation of these proposals and the finer details only seems to have caused more anxiety for both leaseholders and freeholders alike.
If you would like to speak to a leasehold expert, our team of lawyers are on hand to offer advice and support. You can contact them on:
Tel: 02380 221344 / 01202 315005