New rules on renewing leases may have become law but homeowners could still have to wait years until the laws come into effect, a leading property lawyer has warned.
The Leasehold Reform Act became law before parliament was dissolved in May ahead of the general election on 4 July.
But despite the law being rushed through parliament homeowners wishing to renew their leases to take advantage of the new rules face disappointment as the bill is unlikely to become operational until next year at the earliest. Indeed, some parts of the law may not be operational until 2028, according to a letter from Baroness Scott to Lord Kennedy in a written answer from April this year.
Amber Krishnan-Bird, a specialist property solicitor from Osbornes Law, said: “A lot of homeowners who have heard the news about the new law have enquired about extending their lease, only to be disappointed that the law isn’t operational yet, meaning they would be extending under the old rules. Clearly the new law appears to be more beneficial to the leaseholder, so if there is no pressing need to extend then it could be worth waiting.”
The Leasehold Reform Act will introduce a series of new measures that could make renewing a lease cheaper and better value. The main change saw an abolition of marriage value – the value of a property once a lease has been extended – which governs the cost of a lease extension for properties where leases have fallen below 80 years.
Other changes will see leaseholders able to extend their leases to 990 years instead of 90, a cap on ground rent increases and abolishing the rule that a person needs to have owned a property for two years before they are allowed to extend a lease.
Despite the changes in the law Amber says that some homeowners may still want to press ahead with extending their lease before the new law comes into effect.
She said: “If you need to sell your property or get a mortgage then you may be left with no choice but to renew your lease before the new measures come in. There is also the issue that it isn’t clear exactly how much it will cost to renew a lease under the new regime and it could cost more as a way of compensating freeholders for the loss of married vale.
“Finally, we don’t know who will be in government and if they would seek to make changes to the new law. As a result, it may be better the devil you know for some people, but we suggest that unless you need to extend then perhaps wait.”
I think you mean The Leasehold and Freehold Reform Act
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(BTW – I’m a lease extension/ enfranchisement valuer)
Blimey! That’s a dangerous blanket statement to make – Leasehold is VERY complicated. In some way shape or form, Leasehold Law spreads over 50 separate Acts of Parliament.
Forgive me, make that 51.
Unfortunately, there is no “on size fits all” advice that can be given.
A lot of enquiries come from buyers looking at 95+ year leases who are worried about the cost of extending. More still are from leases with eighty-something years remaining. These two types of case may or may not benefit from the new law.
On the face of it, shorter leases look like they might benefit significantly.
However, I guarantee that the first case with a short lease (below 80 years) where the freeholder is one of the big London Landlords will inevitably end up at the First-tier Tribunal.
The argument will be about altering the deferment rate to replace lost marriage value. If the freeholder loses they will take it to the Upper Tribunal. If they lose that then it will go to Appeal. This will then be pushed up to the House of Lords.
Their very highly paid barristers will provide reams of evidence and strings of expert witnesses to claim that the deferment rate should change now that marriage value has been removed. I might suggest that the total professional fees paid out by the freeholder could possibly be in excess of the full market value of the property in question…
And of course, the opposition will be the leaseholder, “the little guy (or girl)” who could not possibly afford to pay for equivalent representation. Most leaseholders presented with such a David & Goliath scenario will take the best offer that the freeholder is prepared to give them, which I doubt will save them a penny.
You might wish at this point to call me very cynical…
For a guesstimate on timeframes we can look to the Sportelli case (which was also about deferment rates) which started in May 2004 and finished in December 2008, basically the best part of three an a half years.
In the meantime we will all do what exactly…? My guess would be that the more aggressive freeholders will refuse to negotiate down from the old premiums payable and if the leaseholders don’t like it then they too can apply to the Tribunal.
And of course, another of the problems here is the delay getting a case to Tribunal. Even with the reduced levels on lease extensions and enfranchisements that have been happening over the last 2 years as everyone has waited for the new law to come in, the delay in getting your case in front of the Tribunal has gone from just a couple of months to the best part of a year. It can take 4 months just to get an acknowledgement that you have even made an application.
The best advice you can give a client is for them to speak to an enfranchisement lawyer and specialist valuer who will look into their unique case for them and discuss the options.
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I understood that the secretary of the state will set the deferment rates every two years under this new act.
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