Introduction
Leasehold ownership remains one of the most hotly debated issues in the property sector, with ongoing government reforms and intense media scrutiny keeping the issue firmly in the public eye. Concerns around fairness, transparency, and affordability—particularly in relation to lease extensions and freehold purchases—have driven widespread calls for reform. In response, the former Conservative government fast-tracked the Leasehold and Freehold Reform Act 2024 (“LAFRA”). While the Act is now in force, it is heavily reliant on secondary legislation for full implementation. A draft Leasehold and Commonhold Reform Bill was promised for the second half of 2025.
How Valuations Work in Leasehold Property Management
Central to the leasehold reform debate is the role of property valuations, which underpin the cost of key transactions such as lease extensions and collective enfranchisement (where leaseholders purchase their building’s freehold). These complex valuations are governed by the Leasehold Reform, Housing and Urban Development Act 1993 and rely on a combination of statutory formulas and market data, assessed by specialist surveyors.
Key factors in leasehold valuations include:
- Unexpired lease term – Shorter leases reduce a property’s value and increase the cost of extension.
- Ground rent – The freeholder’s income, which is accounted for in the valuation.
- Reversionary value – The projected value of the property once the lease expires and the freeholder regains possession.
- Marriage value – The additional value created when leaseholder and freeholder interests are combined, applicable when leases fall below 80 years.
- Hope value – A speculative figure reflecting potential future gains (e.g., development or extension).
Given their financial significance, valuations often lead to negotiation—and sometimes dispute—between leaseholders and freeholders. LAFRA aims to simplify this process through the introduction of standardised, formula-based valuation methods, with the goal of reducing reliance on expert interpretation and minimising conflict. The intended result is greater transparency, fewer disputes, and improved affordability and accessibility for leaseholders.
Abolition of Marriage Value
Among LAFRA’s most notable reforms is the abolition of marriage value. Currently, this premium must be paid by leaseholders extending leases with less than 80 years remaining. Removing it is expected to substantially reduce the cost of lease extensions, simplifying the valuation process and improving affordability for leaseholders. However, the change represents a major financial shift—transferring significant value from freeholders to leaseholders—and is expected to reshape the leasehold market.
Implications for Leaseholders and Freeholders
The removal of marriage value offers clear advantages for leaseholders. It lowers the cost of extending leases below 80 years, encouraging longer terms and providing more security of tenure. It also removes a complex element of the valuation process, reducing the likelihood of disputes and streamlining negotiations.
For freeholders, the reforms represent a significant loss of income. Marriage value has long been a key element of compensation in lease extensions and enfranchisement claims. Its removal substantially reduces the financial return from these transactions, potentially diminishing the investment appeal of leasehold assets. Many landlords may need to reassess their business strategies or seek alternative revenue streams.
Judicial Review and Challenges
The government acknowledges the scale and complexity of the proposed changes and is currently facing a judicial review brought by a coalition of freeholders and charities. The claimants argue that the Leasehold and Freehold Reform Act (LAFRA) infringes on property rights and undermines investment values.
Key legal objections include:
- Abolition of marriage value – The removal of this premium significantly reduces compensation payable to freeholders.
- Cap on ground rents – Limits ground rent for valuation purposes to 0.1% of the freehold value.
- Elimination of fee recovery – Prevents freeholders from reclaiming reasonable legal and valuation costs in leasehold claims.
The claimants argue that these reforms amount to an unlawful transfer of wealth from freeholders to leaseholders, violating their rights under the European Convention on Human Rights (ECHR), particularly in relation to property ownership and fair compensation. They estimate potential losses in the hundreds of millions of pounds—affecting not only commercial investments but also charitable funding.
The four-day judicial review took place in July 2025, but the judgment remains pending. Any appeal could further delay a final outcome by several months or more.
Government’s position
On 21 November 2024, Housing Minister Matthew Pennycook outlined a proposed timeline for the next stages of reform. A consultation on valuation rates for lease extensions—following the removal of marriage value—was expected by summer 2025, but remains unpublished. The draft Leasehold and Commonhold Reform Bill, which aims to implement Law Commission recommendations and support commonhold as a replacement for leasehold, may be similarly delayed—its progress likely impacted by the ongoing legal proceedings.
We await both the outcome of the judicial review and the introduction of the Leasehold and Commonhold Reform Bill with interest. In the meantime, if you would like to discuss how these developments may affect you—or the challenges you are facing—please get in touch: [email protected] / [email protected]
Author:
David Lowry
Associate for and on behalf of JB Leitch Real Estate
