Leasehold & Freehold Reform Act 2024 becomes law – what is the future for leasehold extensions?

The new Leasehold & Freehold Reform Act 2024 was passed through Parliament before its current recess.  It is not expected to come into force until at least 2025. This article briefly summarises some of the key changes to the existing law relating to the rights of leaseholders of flats to extend their leases.

The current law is governed by the Leasehold Reform Housing & Urban Development Act 1993.  Currently, leaseholders of flats have the right, after they have owned their flat for at least two years, to claim an additional 90 years on their lease at a peppercorn rent (no ground rent) subject to paying a premium to their superior landlord (property owner) and subject to limited changes to their lease terms.

Where leaseholders own a lease that has 80 years or less to run, the premium that they will have to pay to their superior landlord will include an element of what is known as “marriage value”.  This is an additional fee payable to the freeholder, as a part of the premium, which reflects the additional market value of a longer lease.

The new law will:

1. Abolish the two year minimum ownership requirement
2. Allow leaseholders to claim an extension of 990 years, rather than just 90 years
3. Abolish the payment of marriage value.

For the time being, the 1993 Act continues in effect.  For those leaseholders whose leases have just over 80 years left to run, it would be worth taking the advice of a specialist valuer to establish whether to make a claim for a lease extension under the present law, or whether it is worth waiting for the new law to come into force.