Proposed Leasehold & Freehold Bill Valuation proposals – a viewpoint.

Whenever a Chancellor of the Exchequer delivers the annual budget, it is often best to avoid the excitement of the day and look at the detail the following morning when the dust has settled.  The same could be said of the recent King’s Speech when trying to work out the Government’s intentions to reform leasehold and freehold valuations.  Frustratingly, several days later, we are little further forward in having a clear idea of what the Government proposes.

For several months, the Government has said it wants to ‘ban’ leasehold, reintroduce commonhold, and make it cheaper and easier for leaseholders to extend their leases and buy their freeholds by fixing capitalisation and deferment rates and ‘abolishing’ marriage value.

The King’s Speech, and the accompanying Government briefing statement on leasehold reform issued the same day, had been long awaited and was trailed by the Government to the Sunday Times a few weeks earlier confirming a number of significant proposals.  On the day itself some of these proposals were mentioned in the briefing paper, but the big-ticket items, commonhold, fixing rates and abolishing marriage value were absent.  So, are these going to be introduced or not? 

Let’s start at what we expect to be introduced:

Removal of the two-year ownership rule for lease extension applications: relatively uncontroversial and this is expected to be introduced

Lease extension term to be increased from 90 years to 99 years: again, relatively uncontroversial and expected to be introduced

Increasing the 25% non-residential limit on buildings to 50%: it is slightly odd this proposal has been set out in the speech when we are still awaiting the results of a Government consultation.  But it’s in the King’s Speech, so again, we expect it to be introduced.

What appears less likely to be introduced: