Will lease extensions become cheaper?
In September 2018 the Law Commission published a consultation paper with a series of proposed reforms concerning lease extensions and enfranchisement (buying the freehold). The period of consultation finished at the beginning of 2019 and the ‘Report on options to reduce the price payable’ was published on 9th January 2020. A copy of the summary report can be viewed at: https://www.gilmartinley.co.uk/documents/lcr9jan20.pdf.
In the consultation paper, the authors set out various options for ways to make lease extensions and enfranchisement cheaper / easier for leaseholders but the Terms of Reference for the report did not include making recommendations as to which option(s) should be pursued.
As result of this, it is possible that at some point the law will be changed such that the cost of enfranchising or extending a lease will be significantly reduced, even if it would involve depriving the freeholder of its property for insufficient compensation, in valuation terms, amounting to reallocation of wealth from freeholders to leaseholders.
On 7th January 2021 the Government announced that it planned to make lease extensions cheaper but the announcement (which can be viewed at https://www.gilmartinley.co.uk/documents/RJ7Jan21.pdf) was lacking in relevant detail or the anticipated timetable for legal reform. It is therefore possible that lease extensions in the future will cost less.
Update: The Leasehold and Freehold Reform Bill was introduced to Parliament at the end of 2023. The Government has provided some guidance on it here. If it becomes law it will mean that the cost of extending a lease or (in the majority of cases) building a freehold will be significantly less for those leases where the unexpired term is less than 80 years because it includes the 'removal of marriage value'.
Extend Now provides valuation advice on lease extensions and on collective enfranchisement in North London.
Extend Now is part of Gilmartin Ley.