The King's Speech - Lease Extension Reform
In recent years, leasehold reform has been at the forefront of discussions, gaining substantial momentum.
The British monarchy plays a symbolic role in the nation's history, symbolising tradition and continuity. Similarly, leasehold reform is viewed as an essential modernisation of property laws that have been in place for centuries.
In this article, we delve into the significance of leasehold reform, its anticipated changes, and its relevance to a forthcoming speech by King Charles III, shedding light on the pressing need for reform in the domain of lease extensions.
When to Mark the Calendar
On the 7th of November 2023, King Charles III will open the fourth session of parliament.
What to Expect
It’s important to note that the King’s Speech doesn’t equate to immediate legislative changes.
The speech is intended to introduce the government’s proposals for the future. At this stage, everything remains speculative, as these proposals must undergo extensive debate in Parliament over several months.
Following that, the Office of the Parliamentary Counsel (a group of government lawyers who specialise in drafting legislation), have to write these changes into law before the King is invited to give it Royal Assent.
It’s anticipated that a considerable amount of lobbying will occur, with large freehold corporations, local councils, and perhaps even representatives of the King himself attempting to thwart any changes that may impact freeholders financially.
Nationwide revenue from lease extension completions is enormous, constituting a fundamental income stream for some local authorities. Any alterations to this system would necessitate the government making up the difference in increased funding.
Decreased capital gains tax revenues from completed lease extensions would only exacerbate this.
Predicted Future Changes
● Extension of Lease Terms: Amend the ability to extend by +90 years to a new 990 year lease - subject to a higher premium.
● Ground Rent Adjustments: Newly granted leases will be at nil ground rent, but most likely existing leases will remain with contractual ground rent.
● Empowering Leaseholders: Reforms are likely to shift the balance of power in favour of leaseholders, giving them more control over their property, maintenance, and service charges. This would minimise disputes and improve the overall living experience for leaseholders.
Possible, Though Less Likely, Reforms
● Abolishing Marriage Value: A less likely but possible reform may involve abolishing marriage value for leases with fewer than 80 years remaining. It’s important to note that freeholders, including the King, currently benefit from marriage value, making it a point of lobbying and contention.
● Fixed Premiums via an Online Calculator: The use of a government online calculator to determine fixed premiums, instead of relying on lease extension valuers for both the leaseholder and freeholder, could be considered.
● Compensation for Unfair Ground Rent Clauses: The reform may address cases where homeowners have been subjected to unfair ground rent clauses, offering compensation for those who have been adversely affected.
Summary
The anticipated leasehold reform changes for lease extensions are designed to reflect a commitment to modernise property laws and create a fairer and more transparent system for homeowners in the United Kingdom.
The King's Speech will serve as a symbolic reminder of the importance of these reforms in ensuring that property ownership benefits all subjects of the kingdom.
As these changes take shape, they aim to address the longstanding issues faced by leaseholders and, we hope, usher in a new era of fairness, transparency, and security in property ownership.
We will be closely monitoring this situation, and will provide future updates. In the meantime, if you’re interested in discussing lease extensions, please reach out to Hayley Jackson at .
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Disclaimer: This is not legal advice; it is intended to provide information of general interest about current legal issues.