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Lease Extension
and Freehold Enfranchisement

The UK property market is undergoing significant changes, particularly in the realm of leasehold reform. In recent years, lease extension and freehold enfranchisement have become hot topics for property owners, investors, and industry professionals alike.

At Terracotta, we specialise in lease extension and freehold enfranchisement and are well equipped to guide you through the process. We can provide you with the tools to negotiate a settlement or if preferred, negotiate on your behalf.

Understanding the Basics

Lease extension refers to the process by which leaseholders can extend the term of their lease, typically by 990 years under recent reforms.
Freehold enfranchisement, on the other hand, is the right for leaseholders to collectively purchase the freehold of their building, subject to certain qualifications.

The Leasehold and Freehold Reform Act 2024, which became law in May 2024, has introduced significant changes to the leasehold sector. Some of the most notable reforms include:

  • Extending standard lease extension terms to 990 years for both houses and flats.

  • Increasing the non-residential limit on collective enfranchisement claims from 25% to 50% of the internal floor area.

  • Removing the two-year ownership requirement for statutory lease extension claims.

  • Allowing tenants to bring fresh collective enfranchisement or lease extension claims without waiting 12 months after a previous claim's withdrawal.

  • Removal of marriage value from the cost calculation where leases are below 80 years.

These changes aim to make it easier and more affordable for leaseholders to extend their leases or acquire the freehold of their buildings.

While the new legislation has brought some much-needed clarity for the sector and ended several years of uncertainty, most of the changes have yet to come into effect. The new provisions will be subject to Statutory Instruments, which will depend on the current government's priorities and any Secondary Legislation required. Until the new provisions come into effect, the provisions within the Leasehold Reform, Housing and Urban Development Act 1993 (as amended) remain.

Expert Insights

Industry experts and the RICS have welcomed the reforms as a step towards a fairer property market. RICS members have stressed the “importance of protecting leaseholders and residents, while also ensuring we continue work to deliver more high-quality housing”. The changes the Act introduces will only be as good as those who support the sector and the RICS has encouraged the government to continue pushing for greater regulation and professionalism in the sector.

Implications for Property Buyers, Sellers, and Investors

The new legislation has far-reaching implications for various stakeholders in the UK property market:

  • Buyers: Prospective buyers of leasehold properties now have more flexibility and potentially lower costs when considering lease extensions or freehold purchases.

  • Sellers: Leaseholders looking to sell may find their properties more attractive to buyers due to the simplified and more accessible enfranchisement process.

  • Investors: The reforms could potentially increase the value of leasehold investments, particularly in mixed-use developments that now qualify for enfranchisement.

  • Freeholders: While the changes primarily benefit leaseholders, freeholders will need to adapt to the new landscape, including potential increases in enfranchisement claims.

Implications for Property Owners and Investors

For property owners and investors, the increased use of CPOs presents both challenges and opportunities. While the prospect of forced sale can be daunting, it's important to note that those affected by CPOs are entitled to compensation.

The compensation is typically based on the market value of the property, ignoring any increase or decrease in value caused by the proposed scheme. This is known as the 'no scheme principle'. However, the assessment of compensation can be complex, often requiring expert advice.

While CPOs can be challenging for property owners, they also play a vital role in facilitating public interest projects and addressing housing shortages.

At Terracotta Property, we're committed to helping our clients navigate these complexities with confidence. Whether you're facing a potential CPO or simply want to understand your rights and options, our team is here to provide expert guidance and support.

For more information on how we can assist you with compulsory purchase matters or any other property-related concerns, please don't hesitate to contact Terracotta Property

Terracotta Property's Perspective

At Terracotta Property, we understand the complexities of lease extension and freehold enfranchisement. Our team of experts is well-versed in the latest legislative changes and can provide comprehensive guidance to our clients.

WE OFFER

  • Expert Consultation: Our specialists can assess your property's eligibility for lease extension or enfranchisement under the new rules.

  • Valuation Services: We provide accurate valuations considering the recent reforms, ensuring fair premiums for lease extensions or freehold purchases.

  • Negotiation Assistance: We can represent your interests in negotiations with freeholders or other leaseholders, leveraging our market knowledge to secure the best possible terms.

  • Tribunal Representation: In the unlikely event that terms cannot be agreed, we are able to provide representation and expert evidence at the First-tier Tribunal – Property Chamber.

Why choose Terracotta Property

The landscape of lease extension and freehold enfranchisement in the UK is evolving rapidly. The recent reforms present both opportunities and challenges for property owners and investors. As the market adapts to these changes, it's crucial to stay informed and seek expert guidance.

Terracotta Property is committed to helping our clients navigate this changing terrain. Whether you're considering a lease extension, exploring freehold enfranchisement, or simply want to understand how these changes might affect your property investment, we're here to help.

For more information or to discuss your specific situation, please contact Terracotta Property. Our team of experts is ready to provide you with tailored advice and support.

VALUATION services

Terracotta Property provides tailored valuation services for residential, commercial and HMO assets. Using advanced analytics and market expertise, their RICS Registered Valuers deliver accurate insights. Services include assessing income potential for commercial properties, valuing HMOs based on conversions and rental yields, and evaluating residential assets by location, condition, and market trends.