Is the legislation raising more questions than it answers?
Anyone who has been following the journey of the Leasehold and Freehold Reform Bill will be aware that the Bill received Royal Assent as the last piece of legislation to be passed on 24 May 2024 before Parliament dissolved in readiness for the upcoming general election. (Rather frustratingly, despite being passed on 24 May 2024, the full wording of the Act was not published online until 5 June 2024 hence the slight delay in this post!).
On 24 May 2024, news outlets reported on the fact that the Leasehold and Freehold Reform Act 2024 (“LFRA 2024”) had been passed and was now enshrined in law but is that really the full story?
Given the publication of this post, you will probably not be surprised to hear that the answer to the above question is ‘no’.
Whilst the LFRA 2024 has been passed, many of the non-lawyers would be forgiven for not reading section 124 entitled ‘Commencement’. This section states that only one section is in force immediately (section 124 itself) and four other sections of the rather long Act will be coming into force two months after the Act has been passed. The remaining 119 sections and 13 Schedules will come into force once the Government has passed secondary legislation. This relies on the next Government, whatever colour it may be, drafting further legislation before the overwhelming majority of the provisions contained in LFRA 2024 apply in practice.
In addition to this rather sobering section, the areas that most leaseholders and freeholders will be interested in (at least in relation to the enfranchisement sections) contain a multitude of possibilities when put into practice. For example, a landlord is entitled to recover some of their costs for dealing with an enfranchisement claim but these are not to exceed the ‘prescribed amount’. The ‘prescribed amount’ is, of course, a figure to be decided upon in the secondary legislation so we have no idea what this could be currently. If the secondary legislation were to follow costs awarded by the First-tier Property Tribunal in previous cases, this figure could be between £5,000 - £7,000 but we have no way of knowing what this is likely to be at this stage.
Again, of major importance to the participants in an enfranchisement claim, the valuation process has been amended for calculating the premium. However, LFRA 2024 refers to ‘market value’ which is not defined and a ‘deferment rate’ which will be defined, again, in secondary legislation. Whilst the Act has removed the figure for ‘marriage value’ which was, traditionally, what caused many lease extension premiums to increase significantly once the term dropped below 80 years, there are concerns that the deferment rate could be used as a way of compensating landlords for the loss of marriage value.
We have had many enquiries from leaseholders and freeholders alike, asking what the passing of LFRA 2024 means for them. In short, as of today, nothing has changed in relation to statutory lease extensions and collective enfranchisement. Until the Government has passed further legislation, we are all still working within the confines of existing legislation and the current regime.
If you are uncertain as to your options or your rights in relation to any enfranchisement matters, please do not hesitate to contact our leasehold enfranchisement team by emailing Amy Johnson-White at amy.johnson-white@jamiesonalexander.co.uk or Imogen Pawley at imogen.pawley@jamiesonalexander.co.uk and they would be glad to assist. Alternatively, please call on 0330 2000 017 and ask to speak to Amy or Imogen directly.