The Leasehold Reform Bill became law on the 24th of May as part of the “wash up” in the final Parliamentary session under the current Government. This is the third piece of important legislation in the leasehold arena since the Building Safety Act 2022 (BSA) and the Leasehold Reform (Ground Rent) Act 2022. And for many will be seen as the most important and wide reaching legislation since the Commonhold and Leasehold Reform Act 2002 (CLRA).

Is it in force?
Not yet. LAFRA sets out commencement provisions which provide that the leasehold reforms will come into force following secondary legislation. It’s therefore uncertain when those provisions will come into effect. What we know is some of the other provisions relating to rent charges and various amendments to the BSA will probably come into force on 24 July 2024. Arguably, some of this has been rushed through so there is no guarantee all the provisions will come into force. For example, there are provisions from the CLRA that have never come into force, including the obligation to invite all qualifying tenants to a collective enfranchisement (freehold purchase of buildings containing flats) claim.

What has been included?
1. Introducing a new 990 year right to a lease extension at a peppercorn rent for flats and houses. Currently there is a right for leaseholders of flats who qualify to acquire a 90 year extension at a peppercorn
rent. This change will negate any need for further extensions.
2. Removal of the two year ownership rule. This will open the gates for many more lease extension claims. And buyers will not have the pressure of having a seller start the process and assign the benefit of the claim.
3. Abolition of marriage value for leases below 80 years on the date a claim is made. This is more controversial as it may result in lower premiums. However, LAFRA will also be prescribing deferment rates and capitalisation rates, which are used in calculating the premiums payable. The current deferment rates are broadly 5% for flats and 4.75% for houses. If the prescribed rates are lower this will lead to an increase in premiums. Therefore, if you are considering waiting for commencement you must seek professional valuation advice to help weigh up your options.
4. For the purpose of valuations, ground rents will be capped at 0.1% of the value of the property. This will result in savings for leaseholders with high ground rents.