Are Leaseholders about to have the last LAFRA on Leasehold Reform?

The election campaigns are now in full swing, but in the ‘wash up’, that mad dash to pass laws before parliament closed, the Leasehold and Freehold Reform Act 2024(or LAFRA 2024) was published in June 2024.

So, does it come up sparkling?

The truth is, the waters are rather murky, and it’s hard to tell where leaseholders and landlords are left.

On paper, it looks like leaseholders will be better off. They will find it easier to extend their lease and no longer need to pay Marriage Value to landlords at lease extensions. Leaseholders also no longer need to pay some of the landlords costs during claims, among other benefits. There is also a ban on the sale of any new leasehold houses.

However, certain key elements of the new legislation are still up in the air.

For example, the government has not yet specified what the new deferment and capitalisations rates will be that may see movement away from Sportelli which has been the starting point for the deferment rate for nearly 20 years. These will be determined by secondary legislation and it is not yet known when this will be passed.

Until then, we don’t yet know whether lease extension premiums on the whole, including those above 80 years unexpired will increase or decrease despite the Act being in place to make the process cheaper for leaseholders. 

There is also further uncertainty as to when the Act will actually come into force due to the requirement of secondary legislation. This leaves many leaseholders in a period of uncertainty with some keen to get lease extensions underway if premiums can be reduced.. 

With all parties now in election mode and potentially a new government with new priorities incoming, it may be a couple of years before any of these new laws become active..

Adam Smylie, Head of Valuation at Kirkby Diamond comments: “This legislation has been in the wings for the last five years and has had a concerted push to be enacted in the last year. The fact that it was included in the wash up was a surprise to many, myself included due to the complexities of the legislation.  Many will note that proposals to reduce all ground rents to nil or even £250 per annum haven’t been included in the Act due to wider financial impacts on the economy. This is unfortunate for many leaseholders trapped under doubling ground rent arrangements. From a valuers’ perspective, LAFRA 2024 has created more questions than answers until we get more of the much needed detail, so we will be keeping our ears to the ground in order to give our clients the best possible advice… welcome to the unknown!”. 

Kirkby Diamond are ALEP Members and have an active residential leasehold advisory team.

For more information on Leasehold Extension and Enfranchisement queries please contact Adam Smylie 01582 738866 or email valuations@kirkbydiamond.co.uk