We will see the end of marriage value for leases under eighty years, and landlords attempting to recover costs from tenants under a standard statutory claim. Most valuations will now be on the ‘standard’ basis – effectively a term and reversion calculation with a presumed 0.1% cap on the ground rent when valuing the freeholder’s interest. Furthermore, there is a ban on the creation of new leasehold houses.
The much-discussed cap on ground rents - whether that’s at £250 or a peppercorn (nil) – hasn’t been included. In my opinion, this might have been considered if the outcome of the consultation had been published before the parliamentary stages were completed. It could then have been the subject of a late-stage amendment. Unfortunately, the truncated process meant this couldn’t happen so changes to ground rents will have to wait for further legislation under the new government.
There is no news at the moment as to when the results of the consultation will be published, although the Labour Manifesto did commit to controlling ground rents and the King’s Speech also promised that the draft Leasehold & Commonhold Reform Bill would “tackle existing ground rents by regulating ground rents for existing leaseholders so they no longer face unregulated and unaffordable costs.”
What we don’t know is how some of the critical rates such as the deferment rate or capitalisation rate will be arrived at. These are to be prescribed by the Secretary of State and reviewed each decade - according to Paragraph 26 of Schedule 4 & Paragraph 38 of Schedule 5. This will be critical to determining value in the ‘new world.’
At this stage, it seems reasonable to believe that the likely timescale for implementation might well be similar to that envisaged by the previous administration. One key question is how much consultation there will be before the relevant secondary legislation or ministerial orders, are produced to bring this into effect.
Details on commencement are set out in Section 124 of the Leasehold & Freehold Reform Act. A small number of provisions came into force on the 24th July 2024 - two months after Royal Assent. These include measures relating to the remedy for rent charge arrears, repeal of Section 125 of the Building Safety Act 2022, and new procedures under the 2022 Act where an insolvency practitioner is appointed for a higher-risk or relevant building. The rest of the Leasehold & Freehold Reform Act 2024 will come into effect at the discretion of the new Government.
Most of the ‘meatier’ parts of the Act, as far as leasehold reform is concerned, are likely to be subject to commencement under Statutory Instruments. These Statutory Instruments will need to be made by the Secretary of State to be effective, and valuation changes will need various matters such as the relevant rates to be prescribed. It’s quite possible that consultation on these will be needed before the full details of the enabling legislation can be produced.
