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Leasehold & Freehold Reform Bill 2023 3rd December 2023 Key valuation points

The Leasehold and Freehold Reform Bill has now been published and its proposals make welcome significant changes for leaseholders of houses and flats. The draft proposals are likely to be subject to changes and amendments as it travels through parliament. There is no certainty that it will become law or upon timescales.

The draft Bill covers a range of subjects and we are not trying to provide details of the entire Bill here, just those that potentially effect leaseholders seeking to extend their leases, remove or alter ground rents or purchase their freeholds. The new bill is lengthy and appears to seek to alter existing legislation in the 1967 Leasehold Reform Act and the 1993 Leasehold Reform Housing and urban Development Act.

The key points we have identified are as follows:

  • Marriage value to be removed from premium calculations. This will significantly reduce premiums payable where the existing lease is under 80 years.
  • Ground rents above 0.1% of freehold value to be ignored from premium calculations. This will significantly reduce premiums payable where the current ground rent is onerous.
  • Capitalisation and deferment rates to be prescribed by the government. Depending upon what levels are set, this could benefit either the leaseholder or the freeholder.
  • Extended leases to be 990 years instead of 90 years. This is of benefit to the leaseholder and will make little difference to the premium payable.
  • The 2 year ownership requirement for lease extensions to be removed. No longer will leaseholders to have owned a property for 2 years prior to a lease extension claim. Therefore, it will be easier and cheaper to sell a property with a short lease as there will be no need to serve and assign notices prior to a sale.
  • A right for leaseholders with long leases with unexpired terms of over 150 years to buy out ground rent. This means leaseholders with long leases will no longer have to undertake a statutory lease extension to remove a ground rent.
  • The maximum non residential element of a building in an enfranchisement claim to be increased to 50% from 25%. More mixed use properties will be capable of enfranchisement by the leaseholders.
  • Leaseholders enfranchising will be able to require freeholders to take a leaseback of any non-participating flats. Potentially this could make it both easier and cheaper for leaseholders to enfranchise when not all leaseholders are participating in the action.
  • Landlords (freeholders and head leaseholders) will have to bear their own costs in enfranchisement matters. Significant savings for leaseholders as currently leaseholders have to pay Landlords legal and valuation costs.
  • Removal of the provision requiring leaseholders to wait 12 months to make a lease extension claim when a section 42 notice is withdrawn and removal of restrictions on leaseholders making repeat enfranchisement claims. This will be of benefit to leaseholders as the current regulations require delays which can increase valuations and prevent lease extensions and enfranchisement proceeding.

The above could provide significant benefits and cost savings to leaseholders. There will no doubt be changes as the Bill progresses. If you would like to be kept informed of the Bills progress, please email us at your details and we will then send details to you as matters progress.

In the meantime, we at Julian Wilkins & Co Chartered Surveyors can continue to assist with lease extensions, ground rent issues and the purchase of residential freeholds in accordance with the current legislation. Please contact us for further information.

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