What Does It Mean for the Property Market?
Overview
The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024 and represents one of the most significant reforms to residential leasehold law in recent decades. Building on the Leasehold Reform (Ground Rent) Act 2022, the Act forms part of the Government’s wider programme to modernise the leasehold system in England and Wales. While not all provisions are yet in force, the direction of travel is clear and the implications for leaseholders, freeholders and investors are considerable.
Key Change
One of the most notable proposed changes is the abolition of marriage value in statutory lease extensions and enfranchisement claims. Under the current regime, including the Leasehold Reform, Housing and Urban Development Act 1993, leaseholders with fewer than 80 years remaining must pay marriage value, often resulting in a significant uplift in the premium. While the intention is for marriage value to be removed, ultimately eliminating the long established 80 year cliff edge, the timing and practical implementation of this change remain ambiguous, and although it is expected to happen, the point at which it will take effect is still unclear.
Valuation Methodology
The Act also provides for prescribed deferment and capitalisation rates to be set by regulation, with the aim of simplifying valuation methodology. Although the final impact will depend on the rates adopted, greater consistency and predictability in premium calculations is anticipated.
Lease Extensions
Leaseholders will also be entitled to extend their lease to 990 years at a peppercorn ground rent, replacing the previous 90-year extension for flats and 50-year extension for houses. This effectively creates a longer term, more secure interest and may reduce the need for repeat extension claims in the future.
Enfranchisement
Enfranchisement rights have also been expanded. The two-year ownership requirement has been removed and the non-residential threshold in mixed-use buildings has been increased, making it easier for leaseholders to qualify.
What Happens Next
For investors and freeholders, these reforms may materially alter asset values, particularly where portfolios rely on future lease extension premiums or reversionary interests. With further secondary legislation still to follow, timing will be important for those considering action under either the current or forthcoming regime.
The Leasehold and Freehold Reform Act 2024 introduces both opportunity and uncertainty, with specialist valuation advice remaining essential.
If you would like advice on how these reforms may affect value, premiums or strategy, please contact our Valuation team. Valuations – Vickery Holman
