Should we wait to buy a share of a freehold? – Colin Young in The Financial Times

Property Litigation Partner, Colin Young provides expert commentary in the Financial Times looking at the following scenario...

Q: Do you know when the law will change for buying a share of freehold (or extending leasehold) so that it is cheaper and more straightforward? It has been delayed for years. My parents are looking to buy a share of freehold. The current cost is £30,000, but if costs are soon to fall significantly, they will wait.

Colin says: leasehold reform in England and Wales has been on the cards for some considerable time now, but little actual progress has been made. (Almost all property in Scotland is freehold.)

Despite a wealth of consultation papers, ministerial statements and press releases promising change, actual reforms have been slow to materialise. The Leasehold Reform (Ground Rent) Act 2022, dealing with ground rent applicable on the grant of a new lease, is all we have had in recent years.

This year, the government did publish the long-awaited renter’s reform bill, aimed primarily at the short lease market. The King’s Speech recently outlined reforms to the leasehold system that could have a wider effect: extended leases will be granted following a formal claim and new leasehold houses will be banned. However, these reforms are not particularly groundbreaking and do not really have a sizeable effect on valuation.

Within the King’s Speech was a repeated commitment to make leasehold claims “cheaper and easier”. There has been little definitive meat on the bones of this commitment. The government has for some time stated its ambition to “abolish” marriage value — the difference in value before and after a lease is extended — but it is still unclear how it might introduce measures to do so.

This will probably be the last session of parliament before the next general election. How radical any reforms are in this current parliamentary session will almost certainly depend upon how much time is afforded to them. 

The risk for the government will be that any reforms may be subject to challenge from freeholders. Hence, they may choose to focus on new leases in the time available, rather than retrospective changes to existing leases. With the clock ticking, any changes are likely to be modest, lest they risk not getting through at all.

It is probably also worth bearing in mind that, regardless of when further detail is announced as to the likely reforms, one has to take into account the additional time involved in letting the Parliamentary process run its course before such reforms come into force.

That may very well take several months, not least because one is amending a complex area of law that has developed over more than half a century. We are, therefore, still in limbo. I am afraid that your parents will have to carry out some crystal ball gazing like the rest of us. While the King’s Speech reintroduced the intention to reform leaseholds, as yet there is no cogent timeline or plan of implementation.

Read the full article in the Financial Times here (paywall)