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New Year, New Lease – Leasehold Reforms

Solicitors in London

News article published on: 10th January 2020

Following consultation, in 2018, and having received over 2600 responses to the consultation, on the 9th January 2020 the Law Commission published its recommendations for simplifying the process by which Tenants can acquire their freeholds or extend their leases.

The aim of the reforms are to make it simpler and cheaper for Tenants to buy their freeholds or extend their leases whilst still striking a balance with the legitimate interests of Landlords who are subject to this form of compulsory purchase.

Tenant campaigners were keen for a simple formula such as a multiple of ten times the ground rent to be adopted, however the Commission felt that such a method, which would substantially reduce premiums, may breach Landlord’s human rights.

The Commission has made three proposals, the details of the schemes are rather technical however put simply, under the first the leaseholder would not pay either marriage value or hope value, under the second hope value may be paid but marriage value would not and under the third marriage value would be paid but not hope value.

The Commission expresses no preference between the three options and it remains to be seen which if any the government will adopt.

In addition to these proposals the Commission makes some recommendations to simplify the process including, prescribing the rates valuers use to calculate premiums, capping the level of ground rents to be capitalised, creating an online calculator to determine the premium payable and providing that Landlords only receive any “development value” if and when the development is carried out by the Tenants.

Given the continuing uncertainty as to when and if the proposals will be adopted the best advice that can be given to Tenants with long leases (over 82 years) is probably to wait and see what happens.

For those with a particular interest, the full report and a summary can be found by following this link.

For further information please contact Guy Osborn or Amber Larner-Bird in the Leasehold Reform department. Call 020 7485 8811

Blog post written by Guy Osborn

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