Lawyers Plan to Make Buying Leaseholds Cheaper

Lawyers are pushing for reforms to make extending or buying a lease cheaper for landlords and other homeowners. 

The influential Law Commission - an independent body that keeps UK law updated and under review - wants wide-ranging reforms on how the value of buying a leasehold is worked out after a request from the government to scrutinise the process. 

Around 4 million private homes are leaseholds. In a report, the commission has put forward three options to change how the value of a leasehold is calculated. 

Lobby groups campaigned for a simple formula of 10 x ground rent to set the cost of a leasehold. But the Law Commission argues this would infringe freeholder rights. The three options put to the government cover scrapping the marriage value or hope value of leaseholds or just paying one of them. 

The marriage value is the increase in the property's worth following the completion of the lease extension, reflecting the additional market value of the longer lease. The hope value is the potential benefits leaseholders will gain when they buy the freehold from their freeholder.

Property law commissioner Professor Nick Hopkins said: “We were asked to provide options for reform that save leaseholders money when buying their freehold or extending their lease, while ensuring that sufficient compensation is paid to landlords. This is what we’ve done. We are ready to help the government in implementing whichever options for reform they choose.”

Meanwhile, Housing Secretary Robert Jenrick is in no hurry to change the leasehold law.

“We have already committed to addressing the abuses of leasehold seen in recent years, by reducing ground rents to a peppercorn level and limiting new leasehold to apartments, save in the most exceptional circumstances. The Competition and Markets Authority is examining the alleged mis-selling of leasehold properties and I will also await their findings with interest,” he said.