Until 15th July, there had been very little movement on the leasehold reforms since my May update. Then the Government launched two significant consultations. The first relates to the valuation rates to be used to calculate lease extension and leasehold enfranchisement premiums under the Leasehold and Freehold Reform Act 2024 (‘the 2024 Act’) and the second concerns tenants’ liability for landlords'/freeholders’ professional costs under the 2024 Act.
The valuation consultation is to seek views on prescribing the valuation rates and the Standard Valuation Method to be used to calculate how much a tenant must pay to buy the freehold, extend their lease or to buy out their ground rent. Introducing a Standard Valuation Method is intended to remove marriage value from premiums, cap the treatment of ground rents in the valuation calculation at 0.1% of the freehold value, and allow the government to prescribe the deferment and capitalisation rates used to calculate the enfranchisement and lease extension premiums. This should simplify the lease extension and enfranchisement process and hopefully make it less contentious, more transparent, cheaper and more predictable.
The current position on costs in lease extensions and leasehold enfranchisements is that a tenant pays their landlord’s/freeholder’s non-litigation costs, but the 2024 Act provides that all parties bear their own non-litigation costs, subject to three limited exceptions where tenants may need to pay a fixed contribution towards their landlord’s/freeholder’s costs. The exceptions are where: a claim is of low value; a claim fails due to the act or omission of the leaseholder; or the enfranchising tenants require a freeholder to receive a leaseback of flats held by tenants who are not participating in a collective enfranchisement. The costs consultation seeks views on these three exceptions, on the level of the fixed contribution and proposes a fourth exception which will allow certain third parties to leases such as resident-led management organisations to recover their non-litigation costs from leaseholders where they would otherwise be at risk of insolvency.
Both these consultations close on 23rd September 2026: Leasehold enfranchisement valuation rates - GOV.UK and Leasehold enfranchisement process costs - GOV.UK.
As set out in my May Update, there are also a couple of things happening at the same time which will also impact lease extensions and enfranchisement:
- The Commonhold and Leasehold Reform Bill is still being drafted and expected in Parliament this Autumn, when we will also see the intended amendments/fixes to the 2024 Act.
- The freeholders’ challenge to the 2024 Act has been granted leave to appeal. There is currently no date for the appeal to be heard, but there is now a deadline of 23rd April 2027, by when it must be heard.
For tailored advice contact our specialist Leasehold Enfranchisement team. We have the expertise to guide you through these reforms and help protect your interests, ensuring you make informed decisions in this rapidly changing landscape.
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