LAFRA 2024 contains provisions which aim to make premiums for statutory lease extensions and enfranchisement of houses and flats substantially lower. However, these are not yet in force and will require secondary legislation for commencement.
A number of landlords are challenging, by way of judicial review, the provisions of LAFRA 2024 which seek to reduce premiums. Those landlords were unsuccessful at the first hearing in the High Court but are appealing with the appeal due to be heard in the Court of Appeal in April 2027.
In the meantime, the Government has opened two new consultations concerning valuation methodology and landlords’ costs of dealing with lease extensions and enfranchisement. Both consultations are open until 23 September 2026.
LAFRA 2024: New consultation on leasehold enfranchisement valuation
The valuation consultation is technical and seeks views on prescribing rates for different elements of the new method of calculation of premiums for lease extensions and purchases of the freehold of houses and flats set out in LAFRA 2024.
The consultation explores setting the capitalisation rate (used to ascertain the term value) and deferment rate (used to determine the value of the reversion). For the deferment rate, the Government proposes a menu of options including continuing existing rates, updating existing rates and alternative approaches. For capitalisation rates, three options are also proposed including a single capitalisation rate, three capitalisation rates, differing by rent review and alternative approaches.
LAFRA 2024: New consultation on reducing enfranchisement and lease extension costs
Once the provisions in LAFRA 2024 are implemented, each party will be required to bear their own non-litigation costs in connection with lease extensions and enfranchisement. There are a limited number of exceptions including for low value claims. The consultation focuses on how to implement the exceptions.
The Government is proposing a costs cap of £1,500 (excluding VAT and disbursements) for low value lease extensions and claims to buy the freehold of a house and £3,750 for collective purchases of the freehold of a building. There would also be a multiplier which could be applied where a claim is exceptionally complex.
The way this would work is that a leaseholder would pay the landlord the lower of the landlord’s reasonable costs and the prescribed amount of £1,500. The consultation also considers either a fixed sum or sliding scale of costs for failed claims and the Government is considering whether a third party to a claim, such as a resident-owned management company, should also be entitled to claim its process costs.
Landlords will no doubt wish to have their say about the Government’s proposals on valuation and costs and respond to the consultation by 23 September 2026. Following closure of the consultation, the Government will announce which of the menu of options it has chosen to calculate capitalisation and deferment rates. Without those figures it is difficult to advise either landlords or leaseholders as to the premium that would be payable under the new valuation methodology. Publication of the Government’s proposed capitalisation and deferment rates will assist in bringing clarity in the lead up to implementation of the relevant provisions changing the valuation process.
We are tracking implementation on our Essential Residential Hub and our timeline of changing landscapes in residential leasehold.
“The LFRA 2024 will set a Standard Valuation Method for calculating how much the leaseholder must pay to buy the freehold, extend their lease or to buy out their ground rent.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
