A yr after the Leasehold and Freehold Reform Act (LAFRA) appeared on the Statute Books, the Leasehold and Freehold Reform Invoice final yr has didn’t create higher certainty out there.
A brand new survey of property professionals reveals that whereas reform stays welcome in precept, confusion and delay have left leaseholders, freeholders and their advisers in limbo.
ALEP (the Affiliation of Leasehold Enfranchisement Practitioners), whose members embrace barristers, solicitors, mission managers and valuers in leasehold enfranchisement, reviews that the LAFRA has not but made the method of extending a lease simpler.
Regardless of the Act’s headline-grabbing provisions – together with the removing of marriage worth and the proposed cap on floor rents when calculating enfranchisement premiums – the fact is that little or no has modified.
Requested whether or not the method of extending a lease had develop into simpler, ALEP members had been largely damaging, 67% mentioned that it was not, whereas 33% noticed no change. One practitioner commented that the Act ‘has not develop into totally enacted and has triggered confusion and delay’, whereas one other famous merely, ‘we’re all caught in limbo’.
The survey additionally requested members about their capacity to advise purchasers on whether or not to proceed with leasehold claims underneath the present authorized framework. Responses had been cautious. Whereas many mentioned they’ll provide steerage, that is tempered with caveats: ‘the recommendation varies with the shopper’s circumstances’; ‘we are able to solely give choices’; ‘it relies on whether or not marriage worth is abolished and on modifications in deferment charges’. In lots of circumstances, advisers admitted that suggestions depend on ‘guesswork’.
ALEP says that there’s clear proof that this uncertainty is stalling market exercise. The organisation reviews {that a} vital majority of respondents have seen a lower in shopper work because the Act’s introduction, with one noting: ‘leaseholders are holding off, and freeholders are holding out’. Others report that leaseholders are solely continuing when pushed by urgent private circumstances similar to remortgage or bereavement.
Consumer decision-making has additionally slowed markedly. A number of ALEP members cited a ‘a lot slower’ tempo than a yr in the past, with one declaring: ‘most purchasers appear to be paralysed by the ‘can we, don’t we’ selection’. The result’s extra time and prices, but additionally heightened anxiousness for purchasers already navigating a posh authorized and monetary course of.
Greater than 80% of members surveyed imagine that the LAFRA has had unintended penalties. These embrace stalled lease extensions, and enfranchisements falling transaction volumes and elevated prices. A typical theme was the sense that the early optimism amongst leaseholders has given approach to frustration. As one member put it, ‘many leaseholders delayed claims just for life to maneuver on… and premiums to rise within the interim’.
There’s additionally concern about valuation points, together with potential modifications to deferment and capitalisation charges, which might drive premiums up relatively than down – the alternative of what many leaseholders count on. A number of members recognized issues across the therapy of intermediate pursuits, with one warning that proposed simplifications ‘will probably lead to the next premium’.
Regardless of these challenges, there’s broad consensus inside ALEP that reform is each crucial and welcome – however solely whether it is performed completely and transparently, and in session with professionals. A number of members recognised the necessity for ‘additional main laws’ – which accords with the federal government’s personal goal of introducing an additional Leasehold and Commonhold Invoice presumably within the autumn.
Mark Chick, a director of ALEP, mentioned: “There isn’t a urge for food amongst practitioners to show again the clock on reform. However we should keep away from repeating previous errors. The following stage – whether or not delivered by secondary laws or a future Invoice, each of which we anticipate – should be constructed on proof, engagement and correct scrutiny. We are going to proceed to assist the event of a fairer and higher functioning system for leaseholders and freeholders alike.
“ALEP stays dedicated to supporting constructive dialogue between authorities, leaseholders, and professionals on this complicated however vital space of property regulation.”
