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Lease Extension/enfranchisement Valuations

Leasehold law has been subject to substantial change recently with the passing of the Leasehold and Freehold Reform Act 2024. Although the act received royal assent, the provisions within the act are yet to be enforced. It is estimated that the act will not come fully into force until 2025/2026. So the provisions of the Leasehold Reform, Housing and Urban Development Act 1993 are still in force in relation to valuations. Qualifying leases are able to be extended by 90 years at a peppercorn ground rent (£0) for a premium which represents the loss to the freeholder. If the unexpired term of the lease is less than 80 years at the time of application then marriage value will be incurred. It is preferential therefore to apply to extend the lease before the lease has less than 80 years unexpired. The leasehold reform act of 2024 dispenses with marriage value altogether and caps ground rents at 0.1% of value. There is considerable uncertainty around the final version of the new act however it is clear that leases with slightly more than 80 years unexpired would benefit from extending now. The leasehold reform act also makes provision for leases to be extended as of right to 990 years plus the outstanding unexpired term. 

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