News

The Leasehold Reform (Ground Rent) Act 2022

This Act commenced 30 June 2022. From this date, the ground rent that may be applied during an informal lease extension (i.e., negotiated outside of the 1993 Act) became regulated. For the duration of the original term, the ground rent may not exceed the rent prescribed by the original lease (Section 6(2)(a) of the Act). For the period of any extension, the ground rent is limited to one peppercorn.

The Leasehold And Freehold Reform Act 2024

The 2024 Act was introduced to reform leaseholder rights and to reduce the premiums payable for statutory lease extension or enfranchisement, gained Royal Assent on the 24th May 2024. The progress of commencement of the reforms detailed in the 2024 Act is as follows:

• Four sections of the 2024 Act (relating to estate rentcharges and effecting changes to the Building Safety Act 2022) came into force on 24th July 2024.
• Measures relating to amendments to the Building Safety Act 2022 commenced on 31st October 2024 under the Statutory Instruments 2024 No. 1018 (C. 67), Building and Buildings, England: The Leasehold and Freehold Reform Act 2024 (Commencement No.1) Regulations 2024.
• On 31 January 2025 the two-year ownership period required for eligibility for statutory lease extension was removed under The Leasehold and Freehold Reform Act 2024 (Commencement No. 2 and Transitional Provision) Regulations 2025.
• On 3 March 2025 the non-residential limit for Right to Manage claims increased to 50%. Leaseholders will also no longer be required to cover the legal fees of their freeholder when making a Right to Manage claim.

Reforms to commence at a future date affecting statutory lease extension valuations are as follows:

• Lease term: Extension of the term of a statutory lease extension from 90 to 990 years (in addition to the existing term).
• Capping of Ground Rent: Under the 2024 Act, ground rent due under existing leases will be capped at 0.1% property freehold value for the purposes of calculating the premium payable for statutory lease extension or enfranchisement.
• Abolition of ‘marriage value’ and ‘hope value’: Once a lease has less than 80 years remaining, current legislation stipulates that the increase in the value of the property caused by lease extension or collective enfranchisement (freehold purchase) must be shared 50:50 with the current freehold owner. This is known as marriage value. Where a flat does not participate in statutory collective enfranchisement, hope value, reflecting potential future income from lease extensions, is payable. The 2024 Act will abolish marriage and hope value.
• Development Value: The 2024 Act abolishes marriage and hope value, treating leaseholders as if they will never be in the market to purchase the freehold. Schedule 4, paragraph 13 of the 2024 Act establishes that this new standard valuation method applies to flats and any property appurtenant to them. Development value which is entirely dependent on the marriage of freehold and leasehold interests may hence not be payable (although this will require testing in court). Other parts of the freehold, however, are to be valued using the previous methodology. The current Labour Government has stated that there are serious flaws in the 2024 Act. We consider that the development value depending on marriage of freehold and leasehold interests is likely to comprise one of these flaws, and is therefore unlikely to commence in this form.
• Fixing of Rates: The deferment and capitalisation rates used for calculation of lease extension and enfranchisement premiums will be fixed by secondary regulations - to be reviewed by the Secretary of State every ten years. This could either increase or decrease the premiums currently payable. The rates to be applied are currently subject to consultation (closing 23 September 2026).
• Legal Cost Protection: Leaseholders will no longer be responsible for the freeholders’ non-litigation costs of collective enfranchisement (legal and surveyor's fees).

This could save approximately £3,000 - £5,000 per statutory process depending on the professionals instructed.

It is important to stress that the overall implications of the reforms for valuation are currently unclear. Until the deferment and capitalisation rates are set by secondary legislation, it is not known whether the premium payable under reforms will be either higher or lower than the current valuation. The GAD exercise “The Leasehold Reform Deferment rates” was published on 16 January 2026 and suggested a deferment rate of 6.3% for flats. This rate is, however, subject to consultation closing 23 September 2026 and is subject to change.

The end result may be that the reforms somewhat balance one another out. For example, although marriage value may be abolished, the Government could fix the rates used in calculations at a level which is punitive to leaseholders. Reductions to the premium payable for statutory lease extension may hence be less than currently anticipated.

The planned legislation is additionally subject to ongoing legal challenge. A judicial review concluded 18th July 2025. The High Court ruled in favour of the valuation and legal cost protection provisions of the 2024 Act on 24 October 2025. The freeholders bringing the legal action were granted the right to appeal by the Court of Appeal 1 April 2026. An appeal hearing may be expected in later 2026 or early 2027 with a judgement being issued mid-2027. Due to this legal action, we cannot provide a timeline for implementation of the 2024 Act.

The Draft Commonhold And Leasehold Reform Bill

On 27 January 2026, the Government published notification of their Draft Commonhold and Leasehold Reform Bill. This proposes to limit ground rents under all leases to £250 per annum (beginning in 2028) with rents being reduced to one peppercorn per annum (nil) after a further 40 years.

The Housing, Communities and Local Government Committee recommended 27 May 2026 that £250 cap on ground rents be brought forward to late 2027. The Times reported 7 June 2026 that the then prime minister Sir Keir Starmer was sympathetic to this approach. Nevertheless, no formal Government statement was forthcoming and with Sir Keir Starmer's departure, acceleration of the reform is subject to political uncertainty.

The Draft Bill remains at consultation stage and is also likely to face legal challenges following Royal Assent as its measures are arguably more punitive than those in the 2024 Act.