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The Ministry of Housing, Communities and Local Government have today announced the government's intentions to legislate leasehold reforms following the Law Commission reports last year.

The headline points of the reforms are:

  • To give leaseholders of flats and houses the right to a 990 year lease extension at nil ground rent, in place of the current right to a 90 and 50 year extension
  • 'Marriage value' is being abolished, being a costly element of valuation in extending leases and buying the freehold where the lease has less than 80 years to run
  • An online calculator will be introduced to give leaseholders clarity on the expected premiums payable
  • Leases for the elderly will have restricted ground rents and they will have the same rights as other leaseholders
  • The ground rent ban announced in December 2017 is said to be before the upcoming parliamentary session with the remaining reforms to be in a second stage.

Whilst this is welcome news for leaseholders, landlords face the prospect of devaluation of assets and enfranchisement valuers may see the loss of their profession. Where landlords have portfolios of leasehold property where the leases have less than 80 years remaining, the expected marriage value income will now be lost, causing a significant devaluation of assets. They can no longer expect a large element of income when leaseholders exercise their rights on those leases.

Landlords with leases granted to the elderly are often provided with enhanced services and tailored leasehold structures. With upcoming possible enfranchisement rights and extension, the systems in place may be put in jeopardy, this will need special consideration.

For leaseholders with more than 80 years remaining on their leases, the time pressure on extending their lease  before that point looks to be removed. This may result in leaseholders holding off on lease extensions and perhaps even current extensions withdrawn in order to wait for the benefits of the new valuation regime. This could in turn see changes to mortgage requirements as to length of lease and what is now considered a 'short' lease.

Separately from reform of rights, the creation of a 'Commonhold Council' has been announced, its purpose being to push commonhold forward as the new preferred method of flat ownership.

Challenges and objections are likely over the coming months but it is now clear that the government are taking a strong and leaseholder friendly approach to making the leasehold system cheaper, easier and more transparent for leaseholders.

If you would like further information or advice about the reforms or enfranchisement in general please contact enfranchisement specialist, William Bethune.