The question of whether to extend your lease now or wait for upcoming reforms is one of the most pressing concerns among flat owners and a common question for leasehold solicitors.
With marriage value forming the majority of the premium payable to the freeholder for leases under 80 years, many leaseholders are understandably holding off in the hope that proposed changes will be introduced soon and bring down the costs of what can be an expensive process.
“Whether to wait for the leasehold reforms is the question of our times, and the answer will differ for each leaseholder depending on their circumstances and specific lease terms. For example, how soon do they need to sell, how onerous is their ground rent, will they stand to gain much from the planned changes. A leasehold solicitor can set out the options, but the decision is always down to the individual.”
— Ricky Coleman, Leasehold Solicitor and Founder, Peppercorn Law
There isn’t therefore an easy answer that applies to anyone with a short lease; even neighbours in the same building could be faced with different factors that affect their decision, for example if one has a mortgage coming to an end soon but the other has no plans to sell or remortgage.
Both may reach different decisions that are reasonable in their own circumstances.
What’s happening with leasehold reform?
Since the reforms were first announced in January 2021, lots of leaseholders have delayed only to find themselves later paying more due to life events like sales or remortgages forcing them to proceed with a section 42 notice, with properties having risen in value, forcing up the lease extension premium.
Although the Leasehold and Freehold Reform Act 2024 was introduced last year as the final act of Parliament before the elections, the key elements that would impact the valuation of lease extensions are not yet in force.
Implementation is expected in phases, with full reforms proposed to be in place by the end of Parliament in 2029.
The government therefore remains committed to change, but we are still waiting on the secondary legislation needed to bring most of the key reforms into law.
There is also the current issue of a pending judicial review that challenges some of the proposed new laws, like capping ground rents.
In all, there is a lot of uncertainty and it seems unlikely that we will have an entirely new legal process in place for some time.
Questions to ask in each case
As a guide, leaseholders should ask:
- Will the reforms make it cheaper to extend my lease?
The reforms are designed to benefit those with short leases or high ground rents. Two major proposals that could make lease extensions cheaper include:
- Abolition of marriage value, reducing costs for leases under 80 years
- A cap on ground rent factored into premium calculations
These changes could significantly reduce what you would pay the freeholder. Additionally, landlords’ legal costs may no longer be recoverable — a saving for all leaseholders regardless of lease length.
However, some valuations may increase under the reforms depending on how deferment and capitalisation rates are set. For this reason, it is arguable if those with lease terms of over 80 years stand to benefit much by waiting for the reforms, other than the removal of landlord’s costs.
- Could waiting actually increase the cost?
Yes, for some leaseholders. The eventual deferment and capitalisation rates (to be fixed by the government for the first time) will play a significant role in determining the premium payable. If these are set lower than current valuation norms, leaseholders may face higher premiums, despite the abolition of marriage value.
Given that these rates have yet to be defined, there’s no universal guarantee of cost savings.
Can you take the risk of waiting?
It depends. While reforms might benefit some, others may suffer by waiting too long. For example:
- If your lease is around 80–82 years, delaying could push it below the 80-year threshold — triggering marriage value under the current law. Even under the new laws, there is a change of a replacement for marriage value, and it is therefore extremely risky to let your lease fall below 80 years.
- If you are planning to sell or remortgage, lenders may insist on a longer lease now. If this leaves you on a higher rate whilst you await the reforms, those costs could really stack up whilst we await further legislation and consultations.
- If your ground rent exceeds 0.1% of your property’s value, waiting might save you money under the expected reforms, if the proposed cap on ground rents is brought in when calculating the premium payable to the landlord.
How the lease length could affect the decision
Here’s how current lease lengths may shape your options:
- 80–83 years: Extending now is likely the best option. Risk of marriage value being triggered if reforms are delayed.
- Planning to move/remortgage soon: Extend now to preserve saleability and mortgage access.
- Above 83 years: You may wait, but be mindful of changes in deferment rates and the potential of paying a higher premium even though landlord’s costs may be abolished.
- Ground rent significantly over 0.1%: Waiting could benefit you if the ground rent cap applies in future but consider how much this could benefit you by taking specific valuation advice from a leasehold surveyor.
- Below 80 years: If you can afford to wait, you may benefit from marriage value being abolished, though there is a lot of uncertainty on whether this could be replaced with some other sort of ‘hope’ value in the calculation. However, this seems to be the group of flat owners that will benefit the most from the reforms.
Should I wait or proceed now?
There’s no single answer. The right decision is a personal one, and depends on:
- Your current lease length
- Your need to sell or refinance
- Your ground rent terms
- Your appetite for uncertainty
Until we see the proposed prescribed valuation rates and secondary legislation from Westminster, the risks of waiting need to be weighed against the potential gains. A qualified leasehold solicitor can guide you — but only you can decide.
Ricky Coleman advises leaseholders across the country and is the founding solicitor of specialist law firm Peppercorn Law
