Freeholders’ Appeal of the Leasehold and Freehold Reform Act 2024 (LAFRA)
Last month the High Court rejected the challenge by freeholders to have some of the provisions of the Leasehold and Freehold Reform Act 2024 (LAFRA) stopped. The main provisions within the Act that affect freeholders are as follows;
1. Removal of payment to freeholders of marriage value.
2. Deferment and capitalisation rates to be set rather than dictated by the market or precedent.
3. Freeholders to pay their own valuation and legal costs.
4. Capping of ground rents to 0.1% of the capital value of the flat.
The appeal is a blow to leaseholders and it is likely that the appeal will delay the implementation of the Leasehold and Freehold Reform Act 2024 by as much as three years. Matthew Pennycook (the Housing Minister) has stipulated that once the act is fully implemented then the provisions need to be “ironclad” and therefore this appeal is likely to prevent the government from bringing the above measures into force until the appeal has worked its way through the court system. Freeholders of course hang onto the hope that the High Court judgement will be overturned and the court will deem the provisions of the act to be against human rights which is the main thrust of the Freeholders’ case.
The main purpose of the Leasehold and Freehold Reform Act 2024 is to make enfranchisement including lease extensions and freehold purchases easier and cheaper for leaseholders. Only a few provisions of the act, and non-controversial, have been brought into force such as the two year rule which means leaseholders no longer have to wait for two years after buying a property before they can serve a section 42 notice to extend the lease.
Leaseholders are therefore left in somewhat of a quandary given that the appeal may cause a further significant delay which could erode public confidence in the act itself and could lead to even further delays. Leaseholders must therefore decide whether a delay is still warranted in the extension of their leases or to pursue the matter now, which would be for all intense and purposes under the existing system. This would include marriage value and set rates including the 5% Sportelli deferment rate.
Some experts states that the High Court ruling was well reasoned and there is limited opportunity for a successful appeal. The delay will benefit freeholders especially given as this could be between 3 to 5 years.
Following a Court of Appeal hearing and should the High Court decision be upheld then the freeholders could appeal to the Supreme Court and there is also the possibility of freeholders taking the matter to the European Court of Human Rights which would further delay the introduction of the above measures. Given the vast amounts of money involved particularly by the elimination of marriage value appeals are likely to proceed until they are stopped by the courts or freeholders succeed in their legal action.
For the time being then we continue with the existing system and we will keep you updated with any further progress as to the appeal.
If you have any questions on this or any other leasehold/freehold matters please call our experts Simon Brook MRICS or Piers De Haan MRICS on (01903) 890666. They can also be emailed at sjb@southeastleasehold.co.uk and pdh@southeastleasehold.co.uk respectively.
