Following recent announcements from Michael Gove in the Press and in an interview on Sky, saying that he wants to abolish the leasehold system, he has now provided a formal update to Parliament
The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022. This Act fulfilled the commitment to “set future ground rents to zero.” The provisions apply only to new lease agreements. New leases of retirement properties are in scope, but not before 1 April 2023.
According to the latest Parliamentary update, on 20 February 2023, Michael Gove, Secretary of State at the Department for Levelling Up, Housing and Communities said:
“We hope, in the forthcoming King’s Speech, to introduce legislation to fundamentally reform the system. Leaseholders, not just in this case but in so many other cases, are held to ransom by freeholders. We need to end this feudal form of tenure and ensure individuals have the right to enjoy their own property fully.”
According to the update, future legislation will also:
- Reform the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
- Abolish marriage value.
- Cap the treatment of ground rents at 0.1% of the freehold value and prescribe rates for the calculations at market value. An online calculator will simplify and standardise the process of enfranchisement.
- Keep existing discounts for improvements made by leaseholders and security of tenure.
- Retain the separate valuation methodology for low-value properties known as “section 9(1)”.
- Give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”.
- Allow for redevelopment breaks during the last 12 months of the original lease, or the last five years of each period of 90 years of the extension to continue, “subject to existing safeguards and compensation”.
- Enable leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term.”
(‘Marriage value’ assumes that the value of one party holding both the leasehold and freehold interest is greater than when those interests are held by separate parties. This announcement means that marriage value will be removed from the premium calculation.)
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