Will the proposed leasehold reforms boost property prices?

Michael Gove, the Secretary of State, has been proposing reforms to what he has called an unfair and “outdated feudal system that needs to go”.

His original plan was blocked by Number 10, but was in the Kings Speech, promising to give leaseholders the right to extend the lease to 990 years, so they never need to fear it expiring.

According to analysis published by property consultancy Knight Frank and Bayes Business School, this could increase the value of homes with short leases by 9.9 per cent on average.

To make it cheaper to lengthen the lease, ministers are reported to be abolishing marriage value — the difference between a leasehold property’s value before and after a lease is extended — and consulting on capping all existing ground rents at a “peppercorn” rate so leaseholders are not expected to compensate freeholders for property price increases or loss of income.  Whilst good news for leaseholders, this is not so for many freeholders, especially those that have built a business buying freeholds specifically for their marriage values –  will they be compensated?

Sebastian O’Kelly, chief executive of the Leasehold Knowledge Partnership charity, said that the “lucrative” lease extension and enfranchisement business run by property management companies is “a golden goose that has been plucked bald” and industry concerns about government reforms were “all too predictable”.




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