The passing of the Act has caused a lot of uncertainty for us and the industry as a whole so it is very difficult for us to be able to advise clients as necessary whether to proceed now or to wait.

To summarise, at present, the changes to the law has not come into effect and we have no certainty at present as to when it will. There is secondary legislation required that needs to be passed in order for the reforms announced to take effect. The estimation of when this may happen amongst industry practitioners is at some point in 2025/2026.

Until the secondary legislation has passed, which seeks to prescribe certain yield rates used within the lease extension calculation, we will not know whether the lease extension premium will be higher or lower in the future. Many practitioners are predicting that leases which have less than 80 years may become cheaper to extend whereas those with low ground rents and longer existing terms (like yours) may become more expensive as a result of the changes and the prescription of the deferment rates in order to comply with the ECHR. One thing that will change is eligibility (so leaseholders qualify immediately for lease extensions rather than having to wait 2 years) and also lease extensions will be for a term of 990 years instead of 90 year extension. In practice, the longer lease term makes little difference to the premium payable and a lease of circa 180 years versus one with 990 years will have very little difference in terms of ‘market value’. If waiting it is possible that you may end up paying a higher premium as your unexpired term on your lease would have diminished further.

The Valuation method is quite set by precedent, be that industry practices, legislation and court decisions. It is mostly contingent on the ‘Long lease value’ of you property which is deferred at a particular rate for the time left on your lease. (for leases above 80 years with no marriage value). The timescales are set by the legislation and I have laid these out below.

• Once the initial Section 42 notice is served the Freeholder has around 2 months to come back with their counter notice accepting your claim.
• Once the counter notice is received there is a 6-month period to agree all of the terms of acquisition which includes the agreement of the premium and the wording of the new lease.
• If the terms of acquisition are not agreed or there is a dispute, an application can be made to the First Tier Tribunal to protect the claim which we find quite rare in cases where lease terms are over 80 years.
• Once the terms of acquisition are agreed there is a 2-month period to complete which includes the signing of the new lease and payment of all funds.

Few pros and cons :

Pros of Extending Now:

• Avoid Marriage Value: Since your lease is just over 80 years, extending now would allow you to avoid paying the marriage value, which applies to leases under 80 years.
• Current Certainty: Extending now gives you clarity on costs and avoids the uncertainty of waiting for new laws, including potential changes in deferment and capitalisation rates that could increase costs.
• Control Over Timeline: You can proceed at your own pace without waiting for the government to implement new legislation, which could take an extended period.

 Cons of Extending Now:

• Potential Higher Costs: If you extend now, you might miss out on the potential benefits of future reforms, such as no marriage value, no legal fees to the freeholder, and a possibly more favourable calculation methodology (if implemented).
• Legal Fees: Currently, you are responsible for covering legal fees associated with the lease extension, which might be eliminated under the new laws.

Pros of waiting:

• Potential Cost Reduction: If your lease is below 80 years or your ground rent is high (above 0.1% of your property’s value), the reforms are likely to make lease extensions cheaper by abolishing the marriage value and capping ground rents in calculations. Alongside not having to pay your freeholder’s costs.
• Beneficial for Short Leases: The reforms are designed to specifically help those with short leases (below 80 years).

Cons of waiting:

• Potential Cost Increase: If your lease is above 80 years or you have a low ground rent, the reforms might make lease extensions more expensive due to unspecified deferment and capitalisation rates.
• Uncertainty: There’s no guarantee when the new laws will be implemented, and the specific impact on lease extension costs remains unclear until the deferment and capitalisation rates are set. The exact impact of the reforms is uncertain until the deferment and capitalisation rates are set. The freeholder’s reasonable costs may also not be waived as it has been suggested that for low premiums they could still be recovered as the current legislation.
• Delayed Implementation: The reforms will take time to be fully implemented, as they require further consultation and secondary legislation.
• Potential Loss of Marriage Value Benefit: If your lease falls below 80 years while waiting for the new laws, you may incur the marriage value, increasing the cost of extending your lease.