Leasehold Reform – Stop press!

Our recent blog, ‘Leasehold Reform – where are we now?’, outlined the Government’s 21 November 2024 announcement, which included the intention in January this year to bring into force the removal, by the Leasehold and Freehold Reform Act 2024, of the two year ownership requirement before a leaseholder can claim an extended lease of their flat or the freehold of their house.

After very little sign of anything happening, Matthew Pennycook announced on 22 January 2025 that he had signed regulations to remove that requirement. The Commencement Order was subsequently made stating that the removal of the two year ownership requirement will come into force on 31 January 2025.

Whilst this might feel like a rather un-momentous event, it will remove the anxiety for many buyers acquiring leases that need to be extended and avoid the need for complex contractual provisions to ensure that their seller is obliged to make the claim and that the benefit of the claim is properly assigned to the buyer. One less hurdle to consider when buying a lease that needs to be extended. Upon registration, and only when the title is registered in the buyer’s name, will the buyer be able to make their own claim.

If the lease is not acquired with the benefit of a claim, the first possible solution would be to ask the Land Registry to expedite the application on the basis that their delay is going to prejudice the ability of the applicant to make a statutory claim to extend their lease or claim their freehold, and that any delay might have an unwelcome valuation impact. If the unexpired term of the lease is getting quite short, or perhaps is about to drop to eighty years or below, the price payable to enfranchise might be higher as it is will almost certain include an additional element, known as marriage value, which can considerably increase the enfranchisement price.

The issue is that the Land Registry is currently taking an inordinate amount of time to register applications and will only agree to expedite applications where hardship can be shown. This is usually where an applicant is in the process of selling or mortgaging their interest and the Land Registry’s delay is going to prejudice that sale or mortgage. So, having to ask the Land Registry to expedite an application introduces a level of uncertainty, as it cannot be assumed that the Land Registry will agree that an ‘unwelcome valuation impact’ amounts to hardship.

The second possible solution to avoid the registration issue would be to acquire the lease with the benefit of the claim. The fact that the two year ownership requirement has been removed does not alter a seller’s ability to pass on to the buyer the benefit of a claim that they have made.

In addition, although the removal of marriage value from enfranchisement calculations, which is contained in the 2024 Act, is not on the Government’s agenda until this Summer, at least the Government has identified the need for further legislation to fix “serious flaws” in the valuation process . The Government will also be consulting on the valuation rates used to calculate the cost of enfranchisement premiums.

The process is going to be slow and cumbersome and indeed any further update to the 2024 Act may yet be many years off.

The issues are complex and specialist legal advice is required.

If you have any questions regarding leasehold and freehold reform please contact Katherine Simpson or any member of the Residential Property team.

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