Three is the magic number in proposals for residential leasehold reform

Published on Friday, January 10, 2020

Under current leasehold reform legislation, residential flat owners have the right (subject to qualifying criteria being met) to extend their lease or collectively purchase the freehold of their block which is known as Collective Enfranchisement. Older legislation deals with leasehold house owners having rights to buy the freehold interest of their house.

In recent years, following the Taylor Wimpey Ground Rent Scandal, leasehold reform has become a hot topic, with the media pressuring the Government to tackle unfair practices.

The Law Commission held a consultation process that took place over 2018, seeking the opinions of interested stakeholders on the current leasehold reform process. After considering the views of these stakeholders (Kirkby Diamond included), The Law Commission has proposed several options aiming to make the residential lease extension and enfranchisement process easier and less expensive for leaseholders.

The proposals are to:

  • Disregard marriage value (which is a significant factor in high premiums for lease extensions).
  • Defer marriage value for a set period (known as hope value).
  • Continue with the current way of valuing lease extension premiums.

In addition, various sub options have been proposed including capping ground rents, prescribing yields used in the calculation, and adjusting premiums payable depending on ownership status.

This report is the first in a series that will be produced which will also deal with qualification and right to manage issues. This series of reports will inform the Government’s decision-making on leasehold reform in order to introduce new legislation.

We at Kirkby Diamond are closely monitoring this situation in order to provide our clients with accurate and up-to-date advice.

Kirkby Diamond is an ALEP member and has an active team dealing with leasehold reform cases for a range of freeholders and leaseholders. For more information on lease extension and enfranchisement matters, please contact Adam Smylieor Jean Howe.