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The amendment of the Leasehold and Freehold Reform Bill and what it means for future leasehold properties

The Government has had its report stage on the 27th February 2024 for the amendment to the Leasehold and Freehold Reform Bill. The Bill will introduce a ban on the sale of new leaseholds properties so that properties will be freehold from the outset other than in exceptional circumstances. The Bill will also make long-awaited changes for leaseholders to extend their leases by making it accessible to do so.

What will happen to current leasehold properties?

If you are an owner of a leasehold property, the Bill will change to make it cheaper and easier for leaseholders to extend their lease, buy their freehold and take over management of their building.

The current standard lease extension terms for leasehold properties are 50 years for houses and for 90 years for flats. With the amendment, this will allow leaseholders to increase the lease extension term to990 years and ground rent to reduce to a peppercorn upon payment of a premium. This will stop the stress of repetitive lease extensions and the outlay that goes with it.

What Will be removed from the current Bill?

Some of the clauses that will be removed is the Marriage-Value, where the lease drops to less than 80 years in length. Marriage value is the amount of extra value a lease extension would add to your property – something you have to share with your freeholder if you’re extending a lease that’s less than 80 years in length.

The removal of the requirement for a new leaseholder to have owned their property for 2 years before they can benefit to extend their lease or purchase the property’s freehold. The new amendment will exercise the leaseholders right to the security of freehold ownership or a 990-year lease extension as soon as possible.

The future for leasehold properties.

The amendment of the bill will ban the sale of new leasehold properties (other than in exceptional circumstances). From the outset, every new property built in England and Wales will be freehold.

The Bill will now move to the House of Lords where further changes may be made. However, it is anticipated that the Bill will be implemented in 2024.

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