The system of pricing extensions for leasehold homes has been branded “absurd” by a campaigner.
The Law Commission this week outlined a variety of potential reforms to the system, but stopped short of suggesting leaseholds be scrapped.
Holders of shorter leases were watching out for any potential changes to so-called marriage value.
Leaseholders must pay this when extending leases of 80 years or less.
Campaigners want radical action now.
Marriage value is “absurd”, said Dean Buckner, a former Bank of England regulator and trustee of the Leasehold Knowledge Partnership, which campaigns for reform.
When a homebuyer purchases a leasehold property, they do not possess it outright. Instead they gain the right to occupy it for a set number of years. They can extend their lease, usually by 90 years, by applying to their freeholder and negotiating a fee.
It is one of three payments a leaseholder with fewer than 80 years to go must make. The other two are a payment to cover ground rents and a payment for the extra 90 years itself.
“The idea that the value of something that I sell you can be different after I sell it is absurd,” said Dr Buckner. “There can’t be a difference in value”
Already, councils have extended more than 2,500 leases, raising more than £27m, according to Freedom of Information responses from 251 English and Welsh authorities.
“The starting point is very much reducing premiums,” she says. “The extent to which the reductions will be made is entirely up to the government.”
This may be a long process, however, she warned. Part of the problem is the lack of a scenario where both parties win.
Because of no set timeframe and the need for government to decide on what to do, leaseholders who have been waiting to renew and are close to the 80-year mark where marriage payments may be due may want to consider extending soon, she said.
“We were hoping this would be more radical,” says Louie Burns, managing director of Leasehold Solutions Group and a campaigner on behalf of leaseholders. “Marriage value particularly is artificial. There’s no reason for it to exist.”
He hopes the government will at least make calculating the payments easier, because currently they are based on rival valuations and negotiation.