Completely out of the blue, the Minister for Housing, Communities and Local Government, Robert Jenrick, announced on 7th January the implementation of sweeping reforms to the Leasehold Reform Acts (on which I posted three blogs on this topic last year.)
The main points announced were:
- The right for all house and flat owners a right to extend their leases to 990 years at nil ground rent
- prescribed capitalisation and deferment rates coupled with an online calculator so leaseholders can assess the likely premium payable,
- potential development value in collective claims can be avoided in exchange for restriction in the freehold transfer on future development
- take up of Commonhold as an alternative route via a to be set up Commonhold Council.
but most surprising of all:
- the abolition of marriage value
The first two points are nothing really new. The current 1993 act buys out already any ground rent to a peppercorn and an extended lease of +90 years comes to tantamount to more or less the same value as one on a 990 year lease (tolerance difference between 1% & 2 %.)
What is surprising is government’s intention to go straight to the most contentious issue of proposing to abolish marriage value which the Law Commission in its valuation recommendations to government a year ago cited as the more extreme end of its proposed spectrum.
Marriage value (which is the latent value which is or would be released by the merger of two or more interests in land) as a concept has been around well before the leasehold reform acts became statute.
One way I like to describe marriage value to clients is that if before the freehold or long extended lease is entered into, the leaseholder owns the tea cup and the freeholder the saucer – after the deal, the leaseholder will own both. A tea cup with its saucer is clearly worth more united as opposed to separately.
Lost marriage value must be worth £100 billion and this will be met by huge resistance by landlords to say the least let alone human rights claims running to £millions.
In short the announcement is more spin than policy reality as the changes are likely to be 3 to 4 years away, The only change likely to be enacted in the upcoming session of Parliament is the setting of ground rents to zero in all new leases, not existing ones.
In the meantime, the current regime remains in place.
As usual, watch this space for news of the proposed reforms if and when they are likely to be enacted.