The Ministry of Housing, Communities and Local Government (MHCLG) has revised its estimates for the potential cost of leasehold reforms, increasing the projected total to £4 billion over a 10-year period.
The changes have been driven largely by a series of technical corrections which have led the government to revise up the total cost of leasehold legislation reforms by around £0.5 billion.
The MHCLG’s addendum, published in April 2025 explains that adjustments in financial modelling were needed to make estimates more accurate. The technical corrections affect the formulas used to calculate the financial impact of the reforms, including the 0.1% ground rent cap, which has a subsequent impact on the value of marriage value reforms.
Despite the increased cost, the government notes that the total estimated benefits to leaseholders have also increased by a commensurate amount, from £3.6 billion to £4.1 billion, reflecting the positive impact of the reforms on leaseholders.
Earlier this year, some of the Act’s reforms were phased in, and as a result leaseholders no longer need to have owned a property for two years in order to begin to extend their lease or apply for a collective enfranchisement process. Further detail on enfranchisement measures will be subject to secondary legislation as set out in the recent ministerial statement. The next stage of enforcement is due later this year.
Revisions to impact statements are routine work for governments and these changes have been made to ensure the accuracy and reliability of data. However, the revised figure does not include the potential cost of any human rights challenges to the LFRA and I do wonder if in fact the revision is as part of some of the ‘background work’ being done by government to ‘put its house in order’ to be ready for these challenges in July. Clearly one of the central points in issue in those cases is the demonstrable loss to freeholders by the legislation, something which the original impact study shows quite clearly, this being part of the overarching policy objective to make things ‘cheaper and easier’ for leaseholders.
A key point in the current human rights act challenges brought by freeholders is that the impact of the legislation is being felt now, even though these fundamental valuation changes (the removal of marriage value and deemed 0.1% cap on ground rents when calculating compensation) are not yet in force.
The impact study does not take into account the possible cost to government of the human rights act challenges and so it may be that the true cost of implementing the LFRA could be higher than current estimates.
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If you have a query concerning leasehold property, then please contact our expert Landlord & Tenant team by emailing leasehold@bishopandsewell.co.uk or call on +44(0)20 7631 4141.
The above is accurate as at 12 May 2025.
The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
