How do I extend my lease term: The Leasehold and Freehold Reform Bill
On 7th November 2023 King Charles in his first speech at the State Opening of Parliament set out the government’s proposals and priorities for the next parliamentary session.
One of these priorities is the introduction of the Leasehold and Freehold Reform Bill. This Bill aims to make it cheaper and easier for Leaseholders to extend their leases.
Currently you must have been the legal owner of a flat for 2 years before you can serve notice on your freeholder that you want to extend your lease with the maximum period the law will allow being an additional 90 years on top of the remaining term of your lease. A premium has to be paid to the freeholder and this is generally calculated by a specialist surveyor who will provide a valuation for this purpose.
Flat owners are often faced with having to extend their leases before being able to sell their flat or alternatively reflecting the fact that there is a reduced term in the sale price. The same goes for applying to remortgage a flat. Once a lease has under 80 years left mortgage lenders may not be keen to offer a mortgage. Additionally, once you go below 80 years, the freeholder can charge what is known as marriage value. Roughly speaking, marriage value is the equal to the amount by which the value of your flat will increase once the lease is extended and freeholders are entitled to a 50% share of this increase.
The Bill is set to allow the lease term to be extended from 90 years to 990 years and there will no longer be a requirement for a minimum of 2 years legal ownership. The Bill will also increase the current 25% non-residential limit to 50% of non-residential floor space. Unfortunately there was no mention of abolishing marriage value so it is possible that this will remain for the time being.
There was little detail on how and when this will be implemented and whether or not it will come into law in the current parliamentary session and before the General Election which is due to be held next year.
How can we help?
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