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Should I wait for the second part of the Leasehold and Freehold Reform Act 2024 to come into force before extending my lease?

June 20, 2024

The Leasehold and Freehold Reform Act (the Act) received Royal Assent on 24th May 2024. The purpose of the Act is to improve the rights of residential leaseholders in England and Wales.

When will it come into force?

The Act is essentially split into two stages. The first stage comes into force on 24th July 2024 and provides amendments regarding the Building Safety Act 2022 including new rights of remedy for building defects and amending the definition of ‘a responsible person’.

The rest of the Act does not yet have a date for coming into force but will cover the following issues:

  • Lease extensions and enfranchisement
  • Service charges and insurance
  • Management of buildings
  • Rentcharges

Lease extensions – now or later?

The method for calculating the premium payable for a lease extension is being changed with the aim of making the calculations more consistent however until the second part of the Act comes into force, we cannot be certain of exactly how.

We do know however that the marriage value element of the calculation is being removed. This accounts for the increase in the value of the property in line with the market value for the extension of the lease. In theory this should reduce the premium payable and you may be thinking therefore to wait until the Act comes into force to extend your lease. However, whether this is the best course of action is determined by how long is left on your lease.

If you have around 80 years left on your lease it is unlikely to be beneficial for you to wait to extend your lease. This is because under the current rules the marriage value is likely to significantly increase once the lease falls below 80 years. As we do not yet know when the second part of the Act will come into force you should act sooner rather than later to minimise the premium payable.  Furthermore, if you need to sell your property soon and want to extend your lease to make it more attractive to prospective buyers it may be beneficial to act sooner rather than later for the same reason of uncertainty.

If you still have 90+ years left on your lease it may be worth waiting a few years to see what the government changes bring.

Our Solihull office is happy to answer any questions you may have about lease extensions. Please contact us on 0121 705 7571 or at enquiries@wallacerobinson.co.uk.

Sophia Kenna
Trainee Solicitor – Commercial Department

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.