Leasehold & Freehold Reform Bill - bullet points?

ThisIsWeird

Hi.

Anyone know what practical difference this new Bill will make? I understand it should make it 'easier and cheaper' to extend Leases, and also provide other protections. But what will it mean in practice?

Who will determine what a fair charge for extending a lease will be? Are there set figures involved anywhere? Eg, a £300k leasehold property with 100 years remaining - how much to extend to 999? Will that be a 'standard' sum, regardless of where the property is located? Will Leaseholders have to go through a process to find out their specific costs, or will they be able to 'look up a chart'?!

(And, for my own closer-to-home interest (mil), what difference does it make if the Lease is held on a detached property - part of a retirement village?)

Thanks.

Emmia

https://www.gov.uk/government/news/leasehold-reforms-become-law

Large parts of the Act will only come into force following further regulations, which will be for the next government 

https://www.legislation.gov.uk/ukpga/2024/22/section/124/enacted

Have a look at the explanatory notes for the Bill which should set lots of this out

https://acrobat.adobe.com/id/urn:aaid:sc:EU:a2f08715-49a0-4f0d-9023-fc04c8163aa1

ThisIsWeird

Thanks, Emmia, but I was kinda hoping that someone else had done the hard work for me  

From what I see, the detail has not been revealed, or possibly even arrived at?

Obviously, it seems to be a 'good thing', but we don't know yet how useful in practice?

AlexMac

Prompted by your post, I googled It ( …the name of the act …simple summary) and came on dozens of articles by keen young property lawyers with too much time on their hands. Such as

https://www.tanfieldchambers.co.uk/2024/06/14/the-leasehold-and-freehold-reform-act-2024-an-overview/

Still a bit impenetrable.  Or the less opaque;

https://homehold.org/standard-article/leasehold-reform/

(EDIT; I was surprised at this very readable article’s explanation that it will take many more months and years to structure implementation)

But presumably the property pages of the weekend papers will also eventually be on the case as detail clarifies, and this website’s main pages will help?

I’m interested as I have two little leasehold BTLs (very decent local Council freeholder so no probs) but also because my local MP Matt Pennycook was leading on the bill for Labour, and, I think occasionally expressed concerns that it was being watered down?  He’ll probably be returned but either way it will be interesting to see how any incoming Government handles it… or not? 

Anyway I’ll be watching this space with as keen an interest as the OP Thisisweird? 

Any legal beagles out there?

eddddy

ThisIsWeird said:

Who will determine what a fair charge for extending a lease will be? Are there set figures involved anywhere? Eg, a £300k leasehold property with 100 years remaining - how much to extend to 999? Will that be a 'standard' sum, regardless of where the property is located? Will Leaseholders have to go through a process to find out their specific costs, or will they be able to 'look up a chart'?!

I suspect this will result in more questions than answers, but In simple terms,

The way that the price of a lease extension is calculated today is...

• 'Diminution in value of landlords interest' +'Value of freeholder's interest' + 'Landlords Share of Marriage Value'

The way it will be calculated when the the new act is implemented is (probably)...

• 'Diminution in value of landlords interest' +'Value of freeholder's interest'

In calculating 'Diminution in value of landlords interest' and 'Value of freeholder's interest', you have to use some variables...

• The market value of the property (the freeholder and leaseholder might disagree on that)

• The Yield (Currently, that's usually between 6% and 8% - the freeholder and leaseholder might disagree on what value to use)

• A Deferment Rate (Currently typically 5% because of case law)

It's not yet known what 'Yield' and 'Deferment Rate' will be specified when the new act is implemented. Some people are worried that new rates could make lease extensions more expensive (rather than cheaper)

(And things like ground rent that increase with RPI add further complications)


But...

• today, the leaseholder has to pay the leaseholders and the freeholders legal and valuation costs

• When the act is implemented, the leaseholder and freeholder will have to each pay their own costs - so it should be cheaper for the leaseholder (and make freeholders less argumentative).

Emmia

ThisIsWeird said:

Thanks, Emmia, but I was kinda hoping that someone else had done the hard work for me  

From what I see, the detail has not been revealed, or possibly even arrived at?

Obviously, it seems to be a 'good thing', but we don't know yet how useful in practice?

The detail of many of the things you want to know will be in regulations (secondary legislation) which will need to be separately consulted on, and then a further legislative process.

It is also possible that elements of the legislation will never come into force, perhaps  because doing so is not politically acceptable to one or more powerful groups.

And the regulations might act on individual groups in ways that are worse than now, but benefit other groups substantially - giving leaseholders a lot more rights, will undoubtedly disadvantage freeholders... 

In many ways this Act is just the starting gun... Not the finishing line.

eddddy

Emmia said:

It is also possible that elements of the legislation will never come into force, perhaps  because doing so is not politically acceptable to one or more powerful groups.

In particular, some Freeholders are arguing that getting rid of marriage value is infringing their human rights (because it's arbitrarily and unfairly taking money away from them).

So they are threatening to take the government to court to challenge this.
 

ThisIsWeird

Thanks all - that is very helpful.