The proposed leasehold reforms announced recently by the government have caused many people interested in collective enfranchisement or needing to extend a long lease, to ask whether they should act now or wait for the law to change.
What are the proposed leasehold reforms?
The government’s proposals are far-reaching, broadly following the recommendations contained in the Law Commission’s reports on residential leasehold and commonhold. However, of particular interest and potential benefit to many, will be the proposal that leaseholder’s may extend their lease to 990 years with no ground rent; effectively a permanent solution to the short lease problem.
While the likely cost involved has yet to be specified, Housing Minister Robert Jenrick has said the amount would be based on a formula which is “fairer, cheaper and more transparent” than that currently used. There is a strong likelihood that this will include the abolition of ‘marriage value’, which in addition to the cost of extending the lease, presently entitles freeholders to add fifty per cent of the increase in the property’s value attributable to the lease extension.
Should I act now or wait?
The predicament for many leaseholders is whether to hold out for legislation in the hope of achieving a significant saving or to proceed immediately.
In reaching a decision, it’s important to remember that whilst the government’s announcement is encouraging, it currently amounts to no more than a statement of intent. The timescale for any legislation is still likely to be measured in years rather than months. For those whose leases have around 80 years or less remaining, they will be taking a significant risk by choosing to wait for the reforms rather than acting now, as there is no certainty the end legislation will deliver on all the promises. For others, the need to sell or re-mortgage their property may mean they cannot wait.