Leasehold changes - When are they expected to change and is there anyway to calculate



New Member
Does anyone know when the governments leasehold changes are expected to come in? And what impact they would have on the valuation?

I still own the freehold of my old flat (just a two flat Victorian House) as the other flat was planning on extending their lease. Since then they have sold their flat to a developer who wants to extend the lease, a valuation was done by a surveyor 2 years ago but the developer has said that he'll only offer half the valuation and if I don't take that he'll wait till November 2021 when he says the rules are changing and he'll get it muich cheaper. I can't find anywhere that gives an idea when the rules are changing and how much the new rules will effect the valuation.

Thanks for any help on this.


New Member
The government has issued proposals, and they are just that. It is inevitable that there will be a challenge from the great estates in London and the insurance industry who now hold large swaths of ground rents. This will go all the way to the European Court of Human Rights (who still hear such cases notwithstanding Brexit)

One of the key issues is marriage value. This may well be abolished BUT the deferment rate used to value the reversion could well fall from 5% to 4% which would take back almost all savings a lessee would make if marriage value was abolished

Some 15 years ago the deferment rate was set at 4.75% to 5% (Sportelli) and in arriving at that figure it was determined that the long term risk-free rate was 2.25% . At that same time the Ogden rate used in personal injury claims was also around that figure i.e. 2.5%

In 2017 the government lowered the long term interest rate i.e. the Ogden rate from 2.5% to MINUS 0.25%

If just 1/3 of that reduction i.e. 1/3 of 2.75% = 0.9%) was applied to the deferment rate lowering it to just over 4% then marriage value almost disappears

Lowering the deferment rate would make the calculation easier, quicker because currently marriage value is about trying to work out values in a no act world and has become very complex. Simply lowering the deferment rate would be a great deal easier and quicker

The area where the government could make it easy quicker and cheaper for lessees would be for the landlord to bear his own costs - a lessee has to pay the landlords costs as well as his own and this can amount to £5,000 plus. The influential landlords in London, may accept such a proposal in return for a significant scaling back of other ideas such as marriage value and capping of rents. These savings in professional costs would be meaningful particularly for lessees with modest flats in constituencies which matter.

In conclusion, it will be some time before reforms to existing leases become law and may well be watered down. In the meantime the costs of extending a lease sub 80 years rises by around 5% per annum.

The developer will either wish to sell or refinance and the short lease will be an issue, and they will have no choice but to pay the correct price. It is a subject I specialize in and for certain no defined date of November 2021 has been given. The concept of no new ground rents on new leases will be the first piece of legislation to come in and that may be published as a draft bill by that date.

If I was in your position which is that you own the freehold but have sold your flat then I would offer to sell it and serve a section 5 notice at not far off the enfranchise price.