Tories slam Labour’s housing pledge as government hints at pet reforms for leaseholders
9 months ago | 2 comments
The cost of indecision: When waiting for leasehold reform becomes a liability
12:01 AM, 28th July 2025, 9 months ago
27
Many leaseholders today find themselves sitting on a financial time bomb. Not because of economic turmoil or interest rates, but due to a simple decision – they waited. They waited for reform. The promises began in 2018 by the Law Commission – a bold vision of easier, cheaper lease extensions, abolition of marriage value, and sweeping changes to the system. The messaging was clear: big changes are coming!
And so, as is clearly evidenced by the decline in lease extension activity, many did nothing. In the background, some advisers echoed that view hinting at potential savings. Why pay thousands today when the law might be about to change? From a distance, that felt like the prudent choice.
Fast forward to 2025. Reform has happened – well, sort of. We have Leasehold and Freehold Reform Act 2024 (LAFRA), which was rushed through in the final hours of the last government. But it hasn’t settled the key valuation questions, such as how a ground rent is to be capitalised or what deferment rate applies to a landlord’s reversion. These key inputs remain in flux and more consultation is expected. Furthermore, with a Human Rights challenge being heard over the proposed abolition of marriage value, even if the landlords win, what about an appeal?
Meanwhile, the cost of delay for flat owners has quietly mushroomed.
How the cost builds
Lease extension premiums increase by 5% each year, which is compounded. And that’s even before marriage value applies. A flat with 86 years left in 2018 will now have 79 years. This is a dangerous threshold for flat owners who decided to wait because once a lease falls below 80 years, the calculation changes: marriage value kicks in, immediately adding around 4% of the flat’s value to the premium. And each year thereafter, the proportion of marriage value grows as the lease term reduces – and that’s in addition to the 5% compound annual increase.
This is not just academic, it is playing out in real life. The table and graph is prepared by myleasehold. Based on statutory valuation methodology, per £100,000 of long lease value, it shows the rise in premium:
| Years Delayed | Years Remaining | Cost Without MV (£) and % Increase | Cost With MV (£) |
| 0 | 85 | 1,600 | – |
| 1 | 84 | 1,680 + 5.00% | – |
| 2 | 83 | 1,760 + 10.30% | – |
| 3 | 82 | 1,850 + 15.80% | – |
| 4 | 81 | 1,940 + 21.50% | – |
| 5 | 80 | 2,040 + 27.60 | – |
| 6 | 79 | 2,140 + 34.00% | 5,630 |
| 7 | 78 | 2,250 + 40.70% | 5,940 |
| 8 | 77 | 2,360 + 47.70% | 6,250 |
| 9 | 76 | 2,480 + 55.10% | 6,560 |
| 10 | 75 | 2,600 + 62.90% | 6,880 |
Graph: lease extension costs with and without marriage value
This shows the difference in lease extension premiums between 80 years (£2,040 per £100,000) compared to 79 years (£5,630 – an increase of 253%) and 76 years (£6,562).
A classic example
Take, for example, a flat in Fulham worth £500,000 with an 85 lease five years ago. The lease extension premium (excluding ground rent) would cost £8,000 then; today premium cost £10,200. This is an increase of almost 30%. The flat owner was advised to wait for reform, and the lease is now just above the critical 80-year point. Extend today, and it just escapes the added cost of marriage value. Wait another year, and the premium leaps. The risk? Missing the deadline and facing a £20,000 increase, overnight. And to top it off, lenders are increasingly wary of short leases, so the leaseholder is left with a less marketable and less mortgageable asset. Flat owners just don’t seem catch a break.
The reform illusion
There is a bigger issue here: belief in reform as a guaranteed win. Many leaseholders thought government intervention would produce savings. In truth, the reforms – even if fully enacted – were never going to retroactively rescue those who waited too long. Even if the abolition of marriage value survives the legal challenge, the new regime is not yet active, and we still have the definition of ‘non-onerous ground rent’ still up for debate.
So we are in limbo, and the market doesn’t like that. Buyers apply appropriate discounts to leases under 85 years even up to 90 years. Whilst for leases below 80 years, what is it going to cost to extend (including fees) and what is lost in terms of long lease value? The value of the property will be impacted by the buyer’s liability to extend, with all the cost and hassle that comes with it. The buyer is taking on the headache – and that comes at a price.
Understanding the real cost
And this is where it is not just about lease extension premiums. It’s also that delay can reduce flexibility. Flat owners lose leverage in sales negotiations, and based on where we stand today, some flat owners risk being trapped in a game of policy roulette, hoping that the next announcement will magically save them money.
What should advisers say now?
If a lease is approaching 80 years, waiting is a high risk strategy and the effect of compounding the premium over an increasing number of years increases the cost and risk. Even for longer leases, the direction is clear – price creeps up each year, and reform is unlikely to reverse that. Many leaseholders think they are saving money by waiting but maybe they are just compounding the cost and increasing complexity.
Final thoughts
Reform was meant to bring clarity and fairness. Instead, it has delivered delay, uncertainty, and rising costs. For those who acted early – extended their leases and moved on – they are sitting with stronger assets and greater control. Those who waited, and many have, are paying for the privilege. Hope has proven not to be a lease extension strategy.
Mark Wilson is the Director of Myleasehold and a member of ALEP (Association of Leasehold Enfranchisement Practitioners).
Tags:
ground rent, lease extension costs, Lease term impact, leasehold reform, Leaseholder risks, Marriage value, property valuation, UK Property Market
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9 months ago | 13 comments
Member Since January 2020 - Comments: 134
9:16 AM, 2nd August 2025, About 8 months ago
Reply to the comment left by Puzzler at 02/08/2025 – 08:25Your comments are much appreciated – thank you.
I am comfortable that the differences in ground rents for the 1 x flat paying £250 and 6 x flats paying £175 are not substantial enough to justify asking for different contributions to the total purchase price of the freehold – so, yes, an equal split between all the flats currently paying ground rent.
With regard to the one flat paying £0 ground rent, in my opinion:
1) The owner should end up in the same position as other flats after the freehold purchase.
2) The owner should not be expected to pay the same price as others who ‘opt in’ seeing as he has already paid the freeholder for an extended lease and zero ground rent.
So, the question is what to pay?
NewYorkie suggests 50% + legals, which I’m confident is much too high. My feeling is that 20-25% + legals is fair and proportionate.
As for the total consideration, the actual figure is not £87,000, which I used just to simplify the maths in case someone suggested that the split should be unequal and based on the £8,700 ground rent!
Member Since January 2015 - Comments: 1431 - Articles: 1
9:29 AM, 2nd August 2025, About 8 months ago
Reply to the comment left by Ian Cognito at 01/08/2025 – 10:11
Divide it equally between ALL leaseholders and create a management Ltd. That’s what we did in one block.
Get your conveyancer to also draft a Deed of Variation for use by all flats for the lease term extension to 999 years and the ground rent a peppercorn.
Then that negates any leaseholders who need the extension using the services of a solicitor to extend their lease and only then need 2 Directors of the Ltd need sign the DoV and pay the HM Land Registry fee.
Member Since January 2020 - Comments: 134
12:11 PM, 2nd August 2025, About 8 months ago
Reply to the comment left by Judith Wordsworth at 02/08/2025 – 09:29
Agree with all that, Judith.
What’s your view on how much the owner with peppercorn ground rent should pay compared with all the others?
Member Since July 2013 - Comments: 1264 - Articles: 1
8:59 AM, 3rd August 2025, About 8 months ago
Reply to the comment left by Ian Cognito at 02/08/2025 – 12:11
Judith has put it much more succinctly than I did! As to the one who has already paid for the benefit I can see it makes sense for them to pay less. Do they want to participate? If not then just don’t include them in the costs although they should still have the share because it will be easier when they come to sell and if they don’t then you disadvantage them. After enfranchisement everyone will have an extended lease and peppercorn rent. If they do but it is considered they have already paid then you should get advice on what they should pay and divide the rest between the others. Obviously they won’t pay for their extended lease. The alternative is everyone else extends their lease. Depends on whether you want to get of your freeholder. You could opt for RTM. You do need specialist advice
Member Since October 2013 - Comments: 1630 - Articles: 3
10:16 AM, 3rd August 2025, About 8 months ago
Reply to the comment left by Puzzler at 03/08/2025 – 08:59
If you purchase the freehold, everyone who participates owns a share of the freehold. The length of the lease and any ground rent consideration will be at the discretion of the freeholders, and should be at zero cost.
I’ve been Co.Sec. of a share of freehold company, and one of the advantages of owning the freehold is I did not charge for the legal pack for sellers, and provided it to their solicitor in a matter of days. I should have charged a small amount but not the £hundreds charged by freeholders, and which will appear whenever the freeholder wants.
As to the charge to the peppercorn leaseholder, I still believe there would be huge value to them in becoming the freeholder, and that has a cost. Maybe not 50% but consider a charge of £500 plus equal share of legals.
Member Since January 2020 - Comments: 134
1:06 PM, 4th August 2025, About 8 months ago
Reply to the comment left by NewYorkie at 03/08/2025 – 10:16
A limited company will be set up.
The actual total figure to purchase the freehold of the 45 flat block is £140,505.
27 leaseholders have agreed to pay for an equal share.
1 leaseholder (who has already extended) will pay only 1% of what the other 27 are paying.
An accountant leaseholder has suggested 1 share for each £1 paid, so 140,505 shares.
My concern is that it becomes difficult to track the shares, therefore, I’m suggesting:
44 A shares
100 B shares (where 100 B = 1 A)
Each of the 27 fully paid shareholder will be issued with 1 A share.
The one leaseholder who has already extended will be issued with 1 B share.
The company will retain 17 A shares and 99 B shares.
Which method do you favour?
Is their a better alternative?
Member Since October 2013 - Comments: 1630 - Articles: 3
2:37 PM, 4th August 2025, About 8 months ago
I don’t understand why you want to make the shareholding so complicated. We gave each shareholder 1 share with equal voting rights, but all leaseholders had a share of the freehold. Are you suggesting you will give the peppercorn leaseholder a share of the freehold but he will not have the same voting rights as the 27?
What do you intend to do about the ground rent and lease term for the other 17? Presumably, you will charge them if they wish to extend their lease at some point in the future. It would be unfair to grant them an extension and peppercorn for no charge. Of course, they or a new buyer could buy their share in the future.
Member Since January 2020 - Comments: 134
2:59 PM, 4th August 2025, About 8 months ago
Apologies that I haven’t explained myself very clearly!
Of the 45 flats:
Only 27 want to ‘purchase the freehold’ i.e. pay for a share in the management company, afterwhich they will pay a peppercorn ground rent.
17 do not want to purchase the freehold, so will continue to pay ground rent to the newly formed Freehold Management Company.
One wants a share of the freehold but, because he has already paid the current freeholder to extend and benefit from a peppercorn ground rent, does not want to contribute to the purchase (even at a level of 20%, which I had suggested).
Thinking about my previous post, rather than A and B shares, probably better to have 100 shares per flat.
So the fully paid leaseholders get 100 shares, the peppercorn leaseholder gets 1 share and the company retains 1,799 shares.
I suggest that for those wanting to buy-in at a later date, the cost is based on todays price, index-linked. However, they would be paying far more for legals, including the management company’s.
Member Since October 2013 - Comments: 1630 - Articles: 3
5:18 PM, 4th August 2025, About 8 months ago
Reply to the comment left by Ian Cognito at 04/08/2025 – 14:59
Thanks. I think the peppercorn chap is being difficult. What benefits would the 17 get from owning 100 shares, over the existing peppercorn chap owning 1 share? Will the new freeholder’s leases be extended to 999 years, while the peppercorn chap remains on his existing extended lease term?
Member Since January 2020 - Comments: 134
6:12 PM, 4th August 2025, About 8 months ago
Reply to the comment left by NewYorkie at 04/08/2025 – 17:18
The 27 would have voting rights whereas the peppercorner wouldn’t (well, he’d have 1%). They would also receive a share of the ground rent from the 17 who have not bought in.
As it stands, no leases will be extended. Hence, 27 will still have the residual 141 years of the original 150 years and peppercorner will have 231 years.
What is the benefit of extending to 999 years if leaseholders control the freehold?