A series of technical corrections has forced the government to revise up the total cost of leasehold legislation reforms from £3.5bn to £4bn.
Adjustments in financial modelling were needed to make estimates more accurate by Ministry of Housing, Communities and Local Government (MHCLG) in an addendum to the Leasehold and Freehold Reform Act 2024, and this has fuelled a sharp rise in the estimated cost of the Leasehold and Freehold Reform Act 2024.
The legislation, which aims to improve the rights of leaseholders in England and Wales, seeks to make it cheaper for leaseholders to purchase their freehold, increase standard lease extension terms to 990 years for residential properties, and offer greater transparency over service charges.
MHCLG has increased the overall financial impact of the ground rent cap by £563m, from £588m over the 10-year appraisal period to £1.15bn. This has had an impact on marriage value reform, which has reduced from £1.91bn to £1.86bn.
This net change represents a higher estimated cost to freeholders of £513m, while leaseholders look set to benefit by £513m more over the ten years.
The total asset value across properties affected by marriage value reforms dropped from £7.1bn to £6.9bn for England, while the average worth of short leases was adjusted down from £18,500 to £18,000.
The MHCLG also reported that the complete reform package has total benefits of £4.1bn over the appraisal period, most of which are received by leaseholders, while freeholders will feel the majority of the £4bn costs.
Earlier this year, the Act’s reforms was phased in, and as a result leaseholders no longer need to have owned a property for two years in order to begin to extend their lease or apply for a collective enfranchisement process.
The next stage of enforcement is set to come into play later this year.
Read the orginal article: https://propertyindustryeye.com/government-revises-up-total-cost-of-leasehold-reforms-to-4bn/
