On Wednesday 27th March, the Leasehold and Freehold Reform Bill had its second reading in the House of Lords and industry expert, Linz Darlington, MD of lease extension specialists, Homehold, has shared his thoughts and asks ‘what promise will be broken next?’
Highlights of his comment include:
“As Lord Kennedy pointed out, no clarity has been provided on when changes to lease extensions would come into effect. This means the Bill could be passed, but leaseholders could potentially have to wait for years into the future none the wiser on when the benefit of the promises might materialise.
“To avoid this legislation becoming an “eviscerated bill” (to use the terminology of Baroness Taylor), pressure needs to be maintained to ensure no more promises are broken.”
Linz Darlington, MD of lease extension specialists, Homehold says: “It’s been less than a year since Michael Gove rolled back on the promise to “Abolish Leasehold”. It’s been less than a week since it was reported that a second promise to “Abolish Ground Rent” on existing leases had been quietly axed.
“While the Second Reading of the Leasehold and Freehold Reform Bill in the House of Lords was not devoid of positivity for leaseholders, their debate and recent experience simply begs the question: what promise will be broken next?
“A first key promise of the Bill is to abolish a concept called “Marriage Value”.
“When a leaseholder extends their lease, they pay a sum of money to buy the extra years and buy out the ground rent. It’s likely that the value of their flat will jump up following the lease extension. Under the current law, if the lease is below 80 years, they must also share this hypothetical profit – known as Marriage Value – with their freeholder.
“Several of the Lords across the house are clearly advocating for the Government’s promise to abolish Marriage Value to be watered down or removed. Lord Palmer wanted the abolition of Marriage Value only to apply to leases that have not yet fallen below 80 years. Lord Moylan appeared to want it canned entirely.
“There seems to be a lack of understanding by legislators of why short leases sell for such depressed prices and Marriage Value exists in the first place. These flats sell at a discount because the buyer knows when they extend the lease they will be lumbered with the cost, the unfairness of the process and both sets of professional fees. Sharing the discount with the freeholder adds insult to injury.
“A second key promise is to make it cheaper to extend your lease or purchase your freehold.
“Whether or not lease extensions are made cheaper will entirely come down to complex rates – which are missing from the Bill.
“Labour insist these rates should be included in the legislation itself – to avoid a situation where these can be set behind closed doors and after lobbying from interested parties. Baroness Scott – representing the Government during summing up – insisted the Secretary of State must have flexibility to set these.
“The third key promise is simply timing.
“Leasehold Reform has been promised since a consultation in 2017, and it was included in the 2019 Conservative manifesto.
“Thousands of leaseholders have been waiting for years for clarity on these changes before they decide to extend their leases – and all the time their leases are getting shorter and extensions are getting more expensive.
“As Lord Kennedy pointed out, no clarity has been provided on when changes to lease extensions would come into effect. This means the Bill could be passed, but leaseholders could potentially have to wait for years into the future none the wiser on when the benefit of the promises might materialise.
“To avoid this legislation becoming an “eviscerated bill” (to use the terminology of Baroness Taylor), pressure needs to be maintained to ensure no more promises are broken.”
