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News - 17/01/2022

Leasehold reform – We hate to say “I told you so”…

On 7 January 2021 the Government announced, with much fanfare, an intention to shake up the law relating to flat owners extending their leases, and the right for flat owners to get together and buy the freehold of their building. Some of these promised changes were significant; allowing tenants to claim a new lease of 990 years instead of the current limit of 90 years and abolishing the punitive “marriage value”, which forms part of the price a tenant must pay to extend their lease.

At the time, my colleague Rachel and I wrote about these proposed changes (you can read the original article here) and stated that such sweeping reform was at best unlikely, and, in any event, would realistically not come into effect for at least several years. As such, we encouraged leaseholders not to put off extending their leases or seeking to collectively purchase their freeholds in the hope that the Government might change the law to work in their favour at some point in the future.

Fast-forward to this year and on 11 January 2022, the governmental Department for Levelling Up, Housing & Communities made another announcement, though with considerably less fanfare than in 2021. Rather than implementing any significant changes to tenants’ rights as they had outlined, the Government have announced only a consultation inviting views on some minor technical changes to the right to collective enfranchisement; that is, for flat owners to buy the freehold of their building.

Clearly these changes fall well short of the “shake up” promised in 2021. Most notably, they focus only on the right for flat owners to collectively buy the freehold of their building. They do not mention at all either of the key announcements of 2021 – the new lease extension of 990 years and the abolition of marriage value.

The message is clear; significant reform, if it ever arrives, is many years away and tenants should therefore not put off extending their leases or purchasing their freeholds. Holding out for this reform could not only be futile, but furthermore, as time goes by and remaining years left on a lease become shorter, the premium to extend the lease, or the price to purchase a freehold, will only increase with each day that passes.

This government consultation invites homeowners and the housing industry to give their views on proposals from the Department for Levelling Up, Housing and Communities to create a fairer housing system by making it easier and cheaper for leaseholders to buy the freehold of their building. The consultation applies to both England and Wales and will close on 22 February 2022. To find out more and complete the consultation, please click here.


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