A quick reminder: what leasehold actually means
With a leasehold flat, you own the property for a set period of time, but someone else owns the freehold, which is the land and often the building itself. That freeholder is your landlord. You usually pay them ground rent and service charges, and you have to follow the rules written into your lease.
The number of years left on a lease matters a great deal. A lease that started at 125 years and still has 110 years to run is barely a worry. A lease with fewer than 80 years left starts to cost you money, both to extend and when you try to sell. A lease under about 60 years can be hard to get a mortgage on at all.
The reforms are aimed squarely at this problem. They try to make leases longer, extensions cheaper, and the whole system fairer to the people who actually live in the homes.
Longer extensions at a peppercorn ground rent
Before the reforms, when you extended a lease you got a set uplift: 90 extra years for a flat, or 50 extra years for a house, added to whatever was left. The new standard term is a single, much longer 990 years for both flats and houses.
Just as important, the extended lease is set at a peppercorn ground rent. A peppercorn simply means zero, a nominal amount that is never actually collected. So once you extend, your ground rent effectively disappears for the rest of a very long lease.
For most owners this is a real improvement. You extend once, at a fixed longer term, and you are very unlikely to ever need to think about the lease length again.
The end of marriage value
The single biggest saving for people with short leases is the abolition of marriage value. This is a technical charge that has caught out thousands of owners, so it is worth understanding.
When a lease drops below 80 years, the law used to treat the extension as creating extra value, because a longer lease is worth more than a short one. The freeholder was entitled to half of that uplift, called marriage value. In practice it could add many thousands of pounds to the cost of extending, and the shorter the lease, the worse it got.
Under the reforms, marriage value is removed from the calculation. If your lease is already under 80 years, or heading that way, this can cut the cost of extending or buying the freehold substantially. It is the change most likely to save short-lease owners real money.
Old rules versus new rules at a glance
The table below sums up the main shifts. Treat the timing as staged rather than instant: some of these provisions are already law, while others need secondary legislation before they take full effect.
| Area | Old rule | New rule under the reforms |
|---|---|---|
| Flat extension term | 90 years added to the remaining lease | 990 years, at a peppercorn ground rent |
| House extension term | 50 years added, with ground rent | 990 years, at a peppercorn ground rent |
| Marriage value | Charged on leases under 80 years | Abolished, removed from the premium |
| Ownership before extending | You had to own the home for two years first | Two-year wait removed, you can act straight away |
| Right to Manage | Blocked if over 25% was non-residential | Non-residential limit raised to 50% |
| New leasehold houses | Allowed | Banned, with narrow exceptions |
Easier routes to control: no two-year wait, freehold and Right to Manage
The reforms remove the old rule that made you own your flat or house for two years before you could extend the lease or buy the freehold. Once that change commences, a new owner can start the process immediately, which is helpful if you buy a home with a short lease and want to fix it quickly.
Buying the freehold, known as enfranchisement, is meant to become cheaper and simpler too. With marriage value gone and the valuation reworked, the price you pay to own the freehold should in many cases fall. Groups of flat owners buying their building together stand to benefit here.
There is also Right to Manage, which lets leaseholders take over the running of their building without buying the freehold. You appoint the managing agent, control the service charge, and set the standards. The reforms raise the limit on how much of a building can be commercial from 25% to 50%, so many mixed-use blocks with shops on the ground floor now qualify for the first time.
- ▸Extend your lease: Get a much longer term at a peppercorn ground rent, with no two-year wait once that provision is in force.
- ▸Buy the freehold: Own the land and building outright, on your own for a house or jointly with neighbours for a block of flats.
- ▸Take over management: Use Right to Manage to control service charges and repairs without buying the freehold, now open to more mixed-use blocks.
The bigger picture: banning new leasehold and moving to commonhold
The reforms are part of a wider programme to change how homes are owned. New leasehold houses are being banned, with only narrow exceptions, because there is rarely a good reason to sell a house as leasehold rather than freehold.
The government has also said it wants commonhold to become the default way of owning flats, and to phase out new leasehold flats over time. Commonhold lets you own your flat outright, with no lease and no landlord, while shared parts of the building are run jointly by all the owners through a commonhold association. It is common in other countries but has barely been used here.
Alongside this sits a consultation on capping ground rents for existing leaseholders, which could limit what freeholders can charge on leases already in place. Much of this depends on further legislation, so it is best read as a clear direction of travel rather than a set of dates. The intent is stated; the exact timing is expected to be confirmed as the relevant provisions commence.
Frequently Asked Questions
Should I hold off extending my lease until every part of the reform is in force? For most owners it depends on how short your lease is now. A lease drifting below 80 years keeps getting more expensive to fix while you wait, so delaying can cost you more than you save.
Does abolishing marriage value mean extending my lease will suddenly be free? No. You still pay a premium based on the ground rent given up and the extra term added, but removing marriage value takes out the extra charge that hit leases under 80 years hardest.
Can I still get a mortgage on a flat with a short lease while the reforms are being brought in? Many lenders remain cautious about leases under about 70 to 80 years, so a short lease can still limit your buyer pool and your own borrowing until it is extended.
Is commonhold something I can choose for my flat today? Not really yet. Commonhold is still rare and making it the default needs further legislation, so for now you are almost always dealing with a normal leasehold flat.
Key Takeaways
- ✓The standard lease extension is becoming 990 years at a peppercorn ground rent, replacing the old 90-year flat and 50-year house terms.
- ✓Marriage value is being abolished, which is the biggest saving for anyone with a lease under 80 years.
- ✓The two-year ownership wait before extending or buying the freehold is being removed, so new owners can act sooner.
- ✓Right to Manage and freehold purchase are being made easier, with the non-residential limit for Right to Manage raised to 50%.
- ✓New leasehold houses are being banned and the government intends to make commonhold the default for flats over time.
- ✓Many changes are being brought into force in stages and depend on further legislation, so treat timing cautiously and check the position when you act.