Leasehold and Reform Act 2024 – High Court Decision

The ruling, in favour of the government and leaseholders, is the next step in the long journey to make it less expensive for millions of leaseholders to extend their leases or buy their freeholds.

Linz Darlington, Managing Director of Lease Extension specialists, Homehold commented: “The High Court’s judgement includes three major wins for the Government and the estimated 4.5 million leaseholders in the UK.”

He lists the wins as:

1. Abolition of Marriage Value: When you extend your lease or purchase your freehold, your home will jump up in value. Under current rules, if your lease is below 80 years, you must share half of this hypothetical profit with your freeholder. The High Court have decided that this should be removed, because the freeholders are fairly compensated for their loss by other parts of the calculation.

2. Capping Ground Rent in Lease Extension Calculations: Many leases have ground rents which rise at an alarming rate – sometimes to thousands of pounds a year. When you do a lease extension you must pay a sum of money to “buy out” this future ground rent and the Act will make this cheaper by capping the ground rent in the calculation at 0.1% of the flat’s value.

3. Freeholder Pays their own costs: Under the current rules, a leaseholder must pay their own legal and valuation fees, but also that of their freeholder. The Court allowed the new "each side pays their own" cost regime – which will make it cheaper for leaseholders.

While this ruling is an important next step in the leasehold reform journey – it is not the end of the battle. It seems likely that this decision will be appealed, and the outcome might be different. The Government has also said that it needs to complete further consultation on the rates and percentages used to calculate the cost of lease extensions – but has held off until today’s outcome. Only once these rates have been set will leaseholders know whether their lease extension will be cheaper – and for some it could be more expensive.

Linz Darlington concluded: “It has been nearly 18 months since the Leasehold and Freehold Reform Act was passed in the last hours of the Conservative government. To reinvigorate momentum, Matthew Pennycook and Steve Reed must now launch this consultation without delay.”