The very last Bill granted Royal Assent by Parliament before it was prorogued ahead of the UK General Election was the Leasehold and Freehold Reform Act 2024. This is a wide-ranging Act which had been slowly making its way through Parliament. As of April 2024, it still had two Committee stages to go through and contained some very controversial measures. It had already been heavily amended and was not expected to be enacted anytime soon. Its enactment has therefore come as great surprise to many.

Although it has received Royal Assent, it is not yet in force. A few clauses will come into effect in July 2024. These relate largely to amendments to the Building Safety Act 2022. The rest of the Act will come into force when the Secretary of State issues Statutory Instruments to give effect to it. The best guesstimate for when the rest of the Act will come into force therefore is 2025 or perhaps 2026.Some parts may be enacted later than that.

The Act, when it is in force will, amongst other things, do the following:

-entitle leaseholders to a 990 year lease extension (instead of a 90 year extension as at present).

-require freeholders to pay their own costs (instead of leaseholders paying these as at present).

-remove the requirement to have owned the property for two years before extending

-abolish the payment of marriage value to a freeholder where a lease falls below 80 years. This last point is a significant benefit to leaseholders with leases under 80 years.

However, one downside of the Act is that is possible it may become more expensive for leaseholders with leases over 80 years, to extend them. This was not the intention of the Act of course. The issue may arise because the Secretary of State has yet to consider and publish the criteria for assessing the premium payable for lease extensions. The abolition of marriage value for leases under 80 years is very controversial. It moves considerable value from the freeholder to the leaseholder. Pressure from competing interests may mean the criteria for calculating the premium is adjusted to take some account of this. While it will become cheaper for those with leases under 80 years to extend once the Act is in force, it may be more expensive than at present, for those with leases over 80 years. Until the “capitalisation and deferment rates” which will determine the method of valuing a lease extension are decided we really cannot say for sure.

The ink is still wet on the Act of course and practitioners are still working out its ramifications. At this stage it appears that for those with leases over 80 years, there may still be good reason to proceed with a lease extension before the new provisions are enacted. However the position is unclear and may not be clear anytime soon. This is because valuation rates for leases are likely to be consulted on. They may then require secondary legislation to enact which is likely to be done in stages.

We will continue to monitor the position so that we are able to consider the position in the light of individual circumstances .