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On 7th January 2021, the Government announced its intention to legislate to allow leaseholders to extend leases to 990 years with zero ground rent. Details can be viewed here.

So the big question for leaseholders considering lease extensions is do I do this now or wait for the new legislation?

The main motivation to extend a lease is to decrease the rate at which it loses value (flats are depreciating assets under leasehold tenure). This begins to pick up pace when “marriage value” kicks in when the lease has 80 years or less to run. Marriage value is the increase in the value of the property following the completion of the lease extension, reflecting the additional market value of the longer lease. In that this potential ‘profit’ only arises from the landlord’s obligation to grant the new lease, the legislation requires that it be shared equally between the parties.

Whist the proposed legislation falls slightly short of freehold tenure, a lease of 990 years with no ground rent is as close as you can get under the leasehold system.

So I would suggest that if your lease has 85 years or more to run, it may be worth waiting for the proposed new legislation to come into force.

If your motivation for lease extension is to reduce your ground rent to zero, then another article covering this and based on current legislation can be viewed here

 

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