Elaine Dobson, partner at Bircham Dyson Bell LLP is warning landlords to be aware of the Department for Communities and Local Government Consultation on increasing the value limits for long leases. The Consultation period ends on September 12, 2011.

Dobson says: “The Government changed the rental value for assured tenancies on 1 October 2010 from £25,000 to £100,000 and are now looking at extended the value limit for long leases.

“The published proposal is to increase the value limit used to determine the right of a long leaseholder to remain as an assured tenant after the term of the lease expires. Landlords should be aware if these value limits are increased there will be an effect on their reversion value and it is important they partake in the consultation.”

When a long lease comes to an end a long leaseholder may have a right to remain in the property as an assured tenant subject to the property being their only or principal home and satisfying the low rent test and the value limit.

The current value limit (the premium when converted would produce a rent below the current limit of £25,000) applies to any long lease whose premium value is approx £400,000, however by increasing the equivalent rent from £25,000 to £100,000, the value limit increases to above £1.5m and as such brings a huge swath of properties under the value limits. This deprives the landlord of the ability to deal with their freehold estate on the expiry of the long lease.