Leasehold and Freehold Reform Act 2024

• (2) A lease is a community housing lease if—

• (a) the landlord under the lease is a community land trust within the meaning of section 2(7A) of the LR(GR)A 2022 (excepted leases), or

• (b) it is a lease of a house which is, or is in, a building within paragraph 2B of Schedule 14 to the Housing Act 2004 (buildings controlled or managed by co-operative societies), disregarding sub-paragraph (3)(b) of that paragraph.

• (3) A statutory instrument containing regulations made under sub-paragraph (1)(b) is subject to the negative procedure.

Retirement housing leases

3

• (1) A lease that—

• (a) is a retirement housing lease, and

• (b) meets any further conditions which may be specified in regulations made by the Secretary of State.

• (2) A lease is a retirement housing lease if—

• (a) it is a term of the lease that the house comprised in the lease may be occupied only by persons who have attained a minimum age,

• (b) that minimum age is not less than 55, and

• (c) the house comprised in the lease is part of a retirement development or scheme in which the leases of all the houses in that development or scheme meet the requirements set out in paragraphs (a) and (b).

• (3) A statutory instrument containing regulations made under sub-paragraph (1)(b) is subject to the negative procedure.

Leases of certain National Trust property

4

A lease of a house where the house comprised in the lease—

• (a) is a property or part of a property vested inalienably in the National Trust for Places of Historic Interest or Natural Beauty (“the National Trust”) under section 21 of the National Trust Act 1907, or

• (b) is inalienable by the National Trust by virtue of section 8 of the National Trust Act 1939.

Leases granted by the Crown

5

• (1) A lease granted out of a freehold estate by the Crown.

• (2) In this paragraph “the Crown” means—

• (a) His Majesty in right of the Crown, in right of His private estates, or in right of the Duchy of Lancaster, or

• (b) the Duchy of Cornwall.

Part 2 — Categories of permitted lease for self-certification

Leases agreed before commencement

6

A lease granted in pursuance of an agreement entered into before the day on which section 1 comes into force.

Shared ownership leases

7

• (1) A lease that—

• (a) is a shared ownership lease, and

• (b) meets conditions A to D.

• (2) But conditions C and D do not need to be met if the shared ownership lease is of a description specified for this purpose in regulations made by the Secretary of State.

• (3) A shared ownership lease means a lease of a house—

• (a) granted on payment of a premium calculated by reference to a percentage of the value of the house or of the cost of providing it, or

• (b) under which the tenant (or the tenant’s personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the house.

• (4) Condition A: the lease allows for the tenant to increase the tenant’s share in the house by increments of 25% or less (whether or not the lease also provides for increments of more than 25%).

• (5) Condition B: the lease provides—

• (a) for the price payable for an increase in the tenant’s share in the house to be proportionate to the market value of the house at the time the share is to be increased, and

• (b) if the tenant’s share is increased, for the rent payable by the tenant in respect of the landlord’s share in the house to be reduced by an amount reflecting the increase in the tenant’s share.

• (6) Condition C: the lease allows for the tenant’s share in the house to reach 100%.

• (7) Condition D: if and when the tenant’s share in the house is 100%, the tenancy—

• (a) allows for the tenant to acquire the freehold of the house (if the landlord has the freehold), or

• (b) provides that the terms of the lease which make the lease a shared ownership lease cease to have effect (if the landlord does not have the freehold),

without the payment of further consideration.

• (8) A statutory instrument containing regulations made under sub-paragraph (2) is subject to the negative procedure.

Home finance plan leases

8

• (1) A lease that —

• (a) is a home finance plan lease, and

• (b) meets any further conditions which may be specified in regulations made by the Secretary of State.

• (2) A lease is a home finance plan lease if—

• (a) it is granted pursuant to an arrangement which is a regulated home reversion plan within the meaning of Article 63B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), or

• (b) it is granted by a finance provider to a home buyer, pursuant to a rent to buy arrangement.

• (3) A “rent to buy arrangement” is an arrangement in relation to which the following conditions are met—

• (a) a person (the “finance provider”) buys a qualifying interest, or an undivided share of a qualifying interest, in land, and

• (b) the arrangement provides for the obligation of another person (the “home buyer”) to buy the interest bought by the finance provider over the course of, or at the end of, a specified period.

• (4) A “qualifying interest in land” means an estate in fee simple absolute or a term of years absolute, whether subsisting at law or in equity.

• (5) A statutory instrument containing regulations made under sub-paragraph (1)(b) is subject to the negative procedure.

Extended leases

9

• (1) An extended lease, which is a lease that falls within any of cases A to C.

• (2) Case A: a lease of a house granted under Part 1 of the LRA 1967 (tenant of leasehold house entitled to extended lease) in substitution for a lease of a house granted before this Part comes into force.

• (3) Case B: a lease of a house granted in consideration of the surrender in whole or part of a lease of that house granted before this Part comes into force.

• (4) Case C: a lease of a house which takes effect as a deemed surrender and regrant of a lease of a house granted before this Part comes into force.

Agricultural leases

10

An agricultural lease, which is a lease where the house is comprised in—

• (a) an agricultural holding within the meaning of the Agricultural Holdings Act 1986 which is held under a tenancy to which that Act applies, or

• (b) a farm business tenancy within the meaning of the Agricultural Tenancies Act 1995.

Schedule 2

Notice of intent

1

• (1) Before imposing a financial penalty on a person under section 18, an enforcement authority must give the person notice of its proposal to do so (a “notice of intent”).

• (2) A notice of intent must set out—

• (a) the date on which it is given,

• (b) the amount of the proposed penalty,

• (c) the reasons for proposing to impose the penalty, and

• (d) information about the right to make representations under paragraph 3.

Time limits for notice of intent

2

• (1) A notice of intent may not be given to a person in respect of a breach of a leasehold house restriction after the earlier of the following—

• (a) the end of the period of 6 years beginning with the day the breach occurs, and

• (b) the end of the period of 6 months beginning with the day on which evidence comes to the knowledge of the enforcement authority which the authority considers sufficient to justify giving the notice.

• (2) For the purposes of sub-paragraph (1)(a)—

• (a) a breach of section 1(1) or 10(1) occurs on the day the lease is granted or (as the case may be) the agreement is entered into (or, in the case of a breach of either of those provisions consisting of entering into an agreement to grant a lease and subsequently granting it, the day on which the agreement is entered into);

• (b) a breach of section 1(2) occurs on the day of the assignment or (as the case may be) the agreement is entered into (or, in the case of a breach of that provision consisting of entering into an agreement to assign a lease and subsequently assigning it, the day on which the agreement is entered into);

• (c) a breach of section 9(2) occurs on the day the marketing material is made available (or, in the case of marketing material made available in relation to the same lease on more than one occasion, the first day on which such material is made available).

Right to make written representations

3

A person who is given a notice of intent may, within the period of 28 days beginning with the day on which the notice is given, make written representations about the proposal.

Final notice

4

• (1) After the period allowed for representations has expired, the enforcement authority must—

• (a) decide whether to impose a penalty on the person, and

• (b) if it decides to do so, decide the amount of the penalty.

• (2) If the enforcement authority decides to impose a penalty, it must do so by giving the person a notice (a “final notice”).

• (3) A final notice must require the penalty to be paid before the end of the period of 28 days beginning with the day after that on which the notice is given.

• (4) A final notice must set out—

• (a) the date on which it is given,

• (b) the amount of the penalty,

• (c) the reasons for imposing the penalty,

• (d) information about how to pay the penalty,

• (e) the period for payment of the penalty,

• (f) information about rights of appeal, and

• (g) the consequences of failure to comply with the notice.

Withdrawal or amendment of notice

5

An enforcement authority may at any time—

• (a) withdraw a notice of intent or final notice, or

• (b) reduce an amount specified in a notice of intent or final notice,

by giving a notice to that effect to the person to whom the notice of intent or final notice is given.

Appeals

6

• (1) A person who is given a final notice may appeal to the appropriate tribunal against—

• (a) the decision to impose the penalty, or

• (b) the amount of the penalty.

• (2) An appeal must be brought before the end of the period of 28 days beginning with the day after that on which the final notice is given.

• (3) If an appeal is brought under this paragraph, the final notice is suspended so far as it relates to the matter which is the subject of the appeal until the appeal is finally determined or withdrawn.

• (4) An appeal under this paragraph—

• (a) is to be a re-hearing of the enforcement authority’s decision, but

• (b) may be determined having regard to evidence which was not available to the authority when giving the notice.

• (5) On an appeal under this paragraph the appropriate tribunal may quash, confirm or vary the notice.

• (6) If the appropriate tribunal varies the amount of the penalty imposed by the notice, the new amount must be an amount that the enforcement authority had power to impose.

Recovery of penalty

7

• (1) A penalty is recoverable by the enforcement authority that imposed it, if the county court so orders, as if it were payable under an order of that court.

• (2) In proceedings before the county court for the recovery of a penalty, a certificate that—

• (a) is signed by the chief finance officer of the authority that imposed the penalty, and

• (b) states that the amount due has not been received by a date specified in the certificate,

is evidence of that fact.

• (3) A certificate to that effect and purporting to be so signed is to be treated as being so signed unless the contrary is proved.

• (4) In this paragraph “chief finance officer” has the same meaning as in section 5 of the Local Government and Housing Act 1989.

Proceeds of penalties

8

An enforcement authority may apply the proceeds of a penalty towards meeting the costs and expenses (whether administrative or legal) incurred in, or associated with, carrying out its enforcement functions under this Part.

9

Any proceeds of a penalty which are not applied in accordance with paragraph 8 must be paid—

• (a) if the penalty was imposed in relation to a lease of a house in England, to the Secretary of State;

• (b) if the penalty was imposed in relation to a lease of a house in Wales, to the Welsh Ministers.

Manner of giving notices

10

• (1) The Secretary of State may by regulations make provision about—

• (a) how any notice under this Schedule is to be given to a person;

• (b) when such a notice is to be treated as being given.

• (2) A statutory instrument containing regulations under this paragraph is subject to the negative procedure.

Interpretation

11

In this Schedule—

• “enforcement authority” has the meaning given by section 26;

• “leasehold house restriction” has the meaning given by section 17(2);

• “notice” means notice in writing;

• “penalty” means a financial penalty under section 18.

Schedule 3

Removal of redevelopment restrictions on enfranchisement and extension

1

• (1) In section 17 of the LRA 1967 (redevelopment rights)—

• (a) omit subsections (4) and (5);

• (b) in subsection (6)(a), omit the words from “, or” to “application”.

• (2) Omit sections 23 and 47 of the LRHUDA 1993 (tenants’ claim liable to be defeated where landlord intends to redevelop).

Removal of residential restriction on enfranchisement and extension under the LRA 1967

2

Omit section 18 of the LRA 1967 (residential restriction on enfranchisement and extension rights).

Removal of public purposes restriction on enfranchisement and extension under the LRA 1967

3

Omit section 28 of the LRA 1967 (restrictions on enfranchisement and extension where land required for public purposes).

Exception to enfranchisement for certified community housing providers

4

• (1) The LRA 1967 is amended as follows.

• (2) In section 1 (tenants eligible for enfranchisement and extension), after subsection (1B) insert—

(1C) This Part of this Act does not confer on a tenant a right to acquire the freehold of a house and premises if the landlord under the existing tenancy is a certified community housing provider (see section 4B).

• (3) After section 4A insert—

(4B) (1) For the purposes of this Part of this Act, a person is a “certified community housing provider” if the appropriate tribunal has issued a community housing certificate in respect of the person. (2) A community housing certificate is a certificate that the tribunal has determined that the person— (a) is a community land trust within the meaning of section 2(7A) of the Leasehold Reform (Ground Rent) Act 2022, or (b) is of a description, or satisfies conditions, specified for this purpose in regulations made by the Secretary of State. (3) The tribunal may issue a community housing certificate only in respect of a person that has made an application to the tribunal for the certificate. (4) The tribunal may cancel a community housing certificate— (a) on the application of the person in respect of which the certificate is issued, or (b) on the application of a tenant affected by the certificate, if the tribunal considers that— (i) the person in respect of which the certificate is issued does not fall within subsection (2)(a) or (b), or (ii) the certificate was obtained by deception or fraud. For this purpose a tenant is “affected by” a certificate if, by virtue of section 1(1C), the tenant does not have the right to acquire the freehold because the certificate is issued in respect of their landlord. (5) The effect of the tribunal cancelling the certificate is that the person is not a certified community housing provider unless the tribunal issues a new community housing certificate. (6) The Secretary of State may by regulations provide for— (a) the procedure to be followed in connection with an application for a community housing certificate; (b) the procedure to be followed for the cancellation of a community housing certificate (including in connection with an application for the cancellation); (c) any matters to which the tribunal must have regard in deciding whether to issue or cancel a community housing certificate. (7) The Secretary of State may by regulations make provision about the application of this Part in circumstances where— (a) a landlord’s application for a community housing certificate has not been concluded when a tenant gives notice of their desire to have the freehold of a house and premises under this Part, or (b) a tenant’s claim to have the freehold of a house and premises under this Part has not been concluded when a landlord’s application for a community housing certificate is made. (8) Regulations under subsection (7) may in particular provide for— (a) the claim for the freehold to be paused or to have no effect; (b) a time period for the purposes of this Part to be extended in connection with the application; (c) the landlord to compensate a tenant or reversioner in respect of reasonable costs incurred in connection with a claim to acquire the freehold— (i) if the tenant ceases to have the right to acquire the freehold because of the issue of a certificate under this section, or (ii) if the costs are incurred as a result of the claim being suspended because of an application for a certificate under this section; (d) enforcement by the appropriate tribunal of any of the requirements of the regulations; (e) the appropriate tribunal to make orders that are supplementary to the issue of a community housing certificate. (9) Regulations under this section are to be made by statutory instrument. (10) A statutory instrument containing regulations under this section (whether alone or with other provision) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

5

• (1) The LRHUDA 1993 is amended as follows.

• (2) In section 5 (qualifying tenants for enfranchisement), after subsection (2)(a) insert—

(aa) the immediate landlord under the lease is a certified community housing provider (see section 8B); or

.

• (3) Before section 9 insert—

(8B) (1) For the purposes of this Chapter, a person is a “certified community housing provider” if the appropriate tribunal has issued a community housing certificate in respect of the person. (2) A community housing certificate is a certificate that the tribunal has determined that the person— (a) is a community land trust within the meaning of section 2(7A) of the Leasehold Reform (Ground Rent) Act 2022, or (b) is of a description, or satisfies conditions, specified for this purpose in regulations made by the Secretary of State. (3) The tribunal may issue a community housing certificate only in respect of a person that has made an application to the tribunal for the certificate. (4) The tribunal may cancel a community housing certificate— (a) on the application of the person in respect of which the certificate is issued, or (b) on the application of a leaseholder affected by the certificate, if the tribunal considers that— (i) the person in respect of which the certificate is issued does not fall within subsection (2)(a) or (b), or (ii) the certificate was obtained by deception or fraud. For this purpose a leaseholder is “affected by” a certificate if, by virtue of section 5(2)(aa), the leaseholder is not a qualifying tenant because the certificate is issued in respect of their immediate landlord. (5) The effect of the tribunal cancelling the certificate is that the person is not a certified community housing provider unless the tribunal issues a new community housing certificate. (6) The Secretary of State may by regulations provide for— (a) the procedure to be followed in connection with an application for a community housing certificate; (b) the procedure to be followed for the cancellation of a community housing certificate (including in connection with an application for the cancellation); (c) any matters to which the tribunal must have regard in deciding whether to issue or cancel a community housing certificate. (7) The Secretary of State may by regulations make provision about the application of this Chapter in circumstances where— (a) a landlord’s application for a community housing certificate has not been concluded when a nominee purchaser gives notice under section 13 of a claim to exercise the right to collective enfranchisement, or (b) a claim to exercise the right to collective enfranchisement has not been concluded when a landlord’s application for a community housing certificate is made. (8) Regulations under subsection (7) may in particular provide for— (a) the claim for the freehold to be paused or to have no effect; (b) a time period for the purposes of this Chapter to be extended in connection with the application; (c) the landlord to compensate the nominee purchaser, a tenant or a reversioner in respect of reasonable costs incurred in connection with a claim to exercise the right to collective enfranchisement— (i) if a person ceases to be a participating tenant because of the issue of a certificate under this section (and in this case the compensation may relate to reasonable costs for which the person is liable that are incurred after the person ceases to be a participating tenant), (ii) if the participating tenants cease to have the right to collective enfranchisement because of the issue of a certificate under this section, or (iii) if the costs are incurred as a result of the claim being suspended because of an application for a certificate under this section; (d) enforcement by the appropriate tribunal of any of the requirements of the regulations; (e) the appropriate tribunal to make orders that are supplementary to the issue of a community housing certificate.

• (4) In section 39(3)(a) (qualifying tenants for extension), before “(5)” insert “(2)(aa), ”.

• (5) In section 100 (orders and regulations), after subsection (2) insert—

(2A) But a statutory instrument containing regulations under section 8B (whether alone or with other provision) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

Removal of restriction on extension claims by sub-lessees

6

• (1) In the LRA 1967—

• (a) in section 15(8) (terms of new tenancy), omit the words from “shall make” to “, and”;

• (b) in section 16 (exclusion of further rights after extension)—

• (i) omit subsection (4);

• (ii) in subsection (5), omit the words from “and the instrument” to the end.

• (2) In the LRHUDA 1993—

• (a) in section 57(7) (terms of new lease), omit paragraph (a);

• (b) in section 59 (further renewal after grant of new lease), omit subsection (3).

Eligibility of leases of National Trust property for extension

7

For section 32 of the LRA 1967 (saving for National Trust) substitute—

(32) (1) Property is “inalienable National Trust property” for the purposes of this section if an interest in the property is vested inalienably in the National Trust for Places of Historic Interest or Natural Beauty under section 21 of the National Trust Act 1907. (2) This Part does not prejudice the operation of section 21 of the National Trust Act 1907, and accordingly a tenant does not have the right under this Part to acquire the freehold of inalienable National Trust property. (3) The right to an extended lease has effect subject to the following provisions of this section only if and to the extent that the existing tenancy demises inalienable National Trust property. (4) In a case where the existing tenancy is a post-commencement protected National Trust tenancy, the tenant does not have the right to an extended lease. (5) In a case where the existing tenancy is a pre-commencement protected National Trust tenancy, this Act is to have effect in relation to the right to an extended lease without the amendments made by the Leasehold and Freehold Reform Act 2024 (but without altering the effect of this subsection). (6) In any other case, the right to an extended lease has effect subject to subsections (7) and (8). (7) In determining whether the tenant has the right to an extended lease, the following requirements in section 1 do not apply— (a) any requirement for the tenancy to be at a low rent; (b) any requirement in section 1(1)(a)(i) or (ii) for the house and premises or the tenancy to be above a certain value. (8) If the tenant exercises the right to an extended lease, the new tenancy must contain the buy-back term which is prescribed for this purpose in regulations made by the Secretary of State (the “prescribed buy-back term”). (9) A “buy-back term” is a term which gives the National Trust the right to buy the whole or part of the extended lease if— (a) it is proposed to make a disposal of the extended lease that is of a description specified in that term (which may be a disposal of the whole or a part of the property demised), or (b) the National Trust exercises a prescribed buy-back term that is contained in a lease which is inferior to the extended lease. (10) The prescribed buy-back term may, in particular, make provision about— (a) the procedure where it is proposed to make a disposal that is of a description specified in the term; (b) the procedure for exercising the right to buy; (c) the price payable; (d) the payment of costs incurred in connection with the operation of the term (including requirements for one person to pay costs incurred by another person); (e) the operation of the term if the National Trust is not a party to the extended lease. (11) If the National Trust is not the landlord under the extended lease, the National Trust may at any time apply to the appropriate tribunal for an order to secure that the extended lease is varied to contain (if or to the extent that it does not already do so) the prescribed buy-back term; and an order made on such an application may appoint a person who is not party to the extended lease to execute a variation of the lease. (32ZA) (1) For the purposes of section 32, the existing tenancy is a “protected National Trust tenancy” if the tenancy is prescribed, or is of a description of tenancies prescribed, in regulations made by the Secretary of State. (2) Regulations may not provide for a tenancy to be a protected National Trust tenancy unless the tenancy is within case A or case B. (3) Case A: some or all of the property let under the tenancy is— (a) property to which the general public has access, or (b) part of property to which the general public has access (whether or not the general public has access to any property let under the tenancy), whether the arrangements for public access are managed by the National Trust, the tenant or another person. (4) Case B: the existing tenancy was granted to— (a) a former owner, (b) a relative of a former owner, or (c) the trustees of a trust whose beneficiaries are or include— (i) a former owner, or (ii) a relative of a former owner. (5) Regulations under section 32 or this section are to be made by statutory instrument. (6) A statutory instrument containing regulations under section 32 or this section is subject to annulment in pursuance of a resolution of either House of Parliament. (7) In section 32 and this section— - “commencement” means the day on which paragraph 7 of Schedule 3 to the Leasehold and Freehold Reform Act 2024 comes into force; - “disposal”, in relation to an extended lease, includes— the grant of a sub-lease of property demised by the extended lease; a change in control of a body (whether or not incorporated) which owns the extended lease; the surrender of the extended lease; a disposal (of any kind) for no consideration; - “former owner”, in relation to inalienable National Trust property let under a tenancy, means— a person who transferred the freehold of the property to the National Trust, a person who owned the freehold of the property immediately before its transfer to the National Trust by, or at the direction of— the Commissioners for His Majesty’s Revenue and Customs, the Commissioners of Inland Revenue, or the Treasury, a person whose executors transferred, or directed the transfer of, the freehold of the property to the National Trust, or a person who was a beneficiary under a trust whose trustees transferred, or directed the transfer of, the freehold of the property to the National Trust; - “post-commencement protected National Trust tenancy” means a tenancy which— was granted on or after commencement, unless it was granted under an agreement made before commencement, and is a protected National Trust tenancy; - “pre-commencement protected National Trust tenancy” means a tenancy which— was granted— before commencement, or on or after commencement under an agreement made before commencement, and is a protected National Trust tenancy; - “relative” includes a person who is related by marriage or civil partnership; - “right to an extended lease” means the right under this Part to acquire an extended lease.

8

For section 95 of the LRHUDA 1993 (saving for National Trust) substitute—

(95) (1) Property is “inalienable National Trust property” for the purposes of this section if an interest in the property is vested inalienably in the National Trust for Places of Historic Interest or Natural Beauty under section 21 of the National Trust Act 1907. (2) Chapter 1 does not prejudice the operation of section 21 of the National Trust Act 1907, and accordingly there is no right under Chapter 1 to acquire an interest in inalienable National Trust property. (3) The right to a new lease has effect subject to the following provisions of this section only if and to the extent that the existing lease demises inalienable National Trust property. (4) In a case where the existing lease is a protected National Trust tenancy, the tenant does not have the right to a new lease. (5) If— (a) the existing lease is not a protected National Trust tenancy, and (b) the tenant exercises the right to a new lease, the new lease must contain the buy-back term which is prescribed in regulations made by the Secretary of State (the “prescribed buy-back term”). (6) A “buy-back term” is a term which gives the National Trust the right to buy the whole or part of the new lease if— (a) it is proposed to make a disposal of the new lease that is of a description specified in that term (which may be a disposal of the whole or a part of the property demised), or (b) the National Trust exercises a prescribed buy-back term that is contained in a lease which is inferior to the extended lease. (7) The prescribed buy-back term may, in particular, make provision about— (a) the procedure where it is proposed to make a disposal that is of a description specified in the term; (b) the procedure for exercising the right to buy; (c) the price payable; (d) the payment of costs incurred in connection with the operation of the term (including requirements for one person to pay costs incurred by another person); (e) the operation of the term if the National Trust is not a party to the new lease. (8) If the National Trust is not the landlord under the new lease, the National Trust may at any time apply to the appropriate tribunal for an order to secure that the new lease is varied to contain (if or to the extent that it does not already do so) the prescribed buy-back term; and an order made on such an application may appoint a person who is not party to the new lease to execute a variation of the lease. (95A) (1) For the purposes of section 95, the existing lease is a “protected National Trust tenancy” if the lease is prescribed, or is of a description of leases prescribed, in regulations made by the Secretary of State. (2) Regulations may not provide for a lease to be a protected National Trust tenancy unless the lease is within case A or case B. (3) Case A: some or all of the property let under the lease is— (a) property to which the general public has access, or (b) part of property to which the general public has access (whether or not the general public has access to any property let under the lease), whether the arrangements for public access are managed by the National Trust, the tenant or another person. (4) Case B: the existing lease was granted to— (a) a former owner, (b) a relative of a former owner, or (c) the trustees of a trust whose beneficiaries are or include— (i) a former owner, or (ii) a relative of a former owner. (5) Regulations under section 95 or this section— (a) may make different provision for different purposes; (b) are to be made by statutory instrument. (6) A statutory instrument containing regulations under section 95 or this section is subject to annulment in pursuance of a resolution of either House of Parliament. (7) In section 95 and this section— - “disposal”, in relation to a new lease, includes— the grant of a sub-lease of property demised by the new lease; a change in control of a body (whether or not incorporated) which owns the new lease; the surrender of the new lease; a disposal (of any kind) for no consideration; - “former owner”, in relation to inalienable National Trust property let under a tenancy, means— a person who transferred the freehold of the property to the National Trust, a person who owned the freehold of the property immediately before its transfer to the National Trust by, or at the direction of— the Commissioners for His Majesty’s Revenue and Customs, the Commissioners of Inland Revenue, or the Treasury, a person whose executors transferred, or directed the transfer of, the freehold of the property to the National Trust, or a person who was a beneficiary under a trust whose trustees transferred, or directed the transfer of, the freehold of the property to the National Trust; - “relative” includes a person who is related by marriage or civil partnership; - “right to a new lease” means the right under Chapter 2 to a new lease.

Consequential amendments to the LRA 1967

9

The LRA 1967 is amended in accordance with paragraphs 10 to 18.

10

In section 20(2)(d) (jurisdiction and special powers of county court), omit “or 18”.

11

In section 21(1)(c) (jurisdiction of tribunals), omit “or 18”.

12

In section 25(5)(a) (mortgagee in possession of landlord’s interest), omit “or 18”.

13

In section 29 (reservation of future right to develop)—

• (a) for subsection (5) substitute—

(5) For the purposes of this section “local authority” means— (a) the Common Council of the City of London; (b) any county council, county borough council, borough council or district council; (c) any joint authority established by Part IV of the Local Government Act 1985; (d) any economic prosperity board established under section 88 of the Local Democracy, Economic Development and Construction Act 2009; (e) any combined authority established under section 103 of that Act; (f) any combined county authority established under section 9(1) of the Levelling-up and Regeneration Act 2023; (g) any fire and rescue authority created by an order under section 4A of the Fire and Rescue Services Act 2004; (h) the London Fire Commissioner; (i) any police and crime commissioner; (j) the Mayor’s Office for Policing and Crime; (k) any joint board in which all the constituent authorities are local authorities within this subsection.

;

• (b) in subsection (6)(b), omit “as defined in section 28(5)(c) above”;

• (c) after subsection (6) insert—

(6ZA) In this section— (a) “university body” means any university, university college or college of a university; (b) “college of a university” includes— (i) in the case of a university organised on a collegiate basis, a constituent college or other society recognised by the university, and (ii) in the case of London University, a college incorporated in the university or a school of the university; (c) a university and the colleges of that university are, in relation to each other, “related university bodies”.

;

• (d) in subsection (6B)(a), omit “(within the meaning of section 28(6)(b) above)”;

• (e) after subsection (8) insert—

(9) The Secretary of State may by regulations made by statutory instrument make provision (including provision amending this Act) so as to add bodies to those within the meaning of “local authority”. (10) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament.

14

In section 38 (modification of right to possession under Landlord and Tenant Act 1954)—

• (a) in subsection (1), omit the words from “, except” to “so required”;

• (b) for subsection (2) substitute—

(2) In section 57 of the Landlord and Tenant Act 1954, references to a local authority include— (a) a local authority within the meaning given in section 29(5); (b) the Broads Authority; (c) any National Park authority; (d) the new towns residuary body; (e) any development corporation within the meaning of the New Towns Act 1981; (f) a university body within the meaning given in section 29(6ZA); (g) NHS England; (h) any integrated care board; (i) any Local Health Board; (j) any Special Health Authority; (k) any National Health Service trust; (l) any NHS foundation trust; (m) any clinical commissioning group; (n) any Strategic Health Authority; (o) any Primary Care Trust; (p) any body corporate established by or under any enactment for the purpose of carrying on under national ownership any industry or part of an industry or undertaking; (q) the Environment Agency; (r) a body not within paragraphs (a) to (q) that is a harbour authority within the meaning of the Harbours Act 1964 (but only in respect of the body’s functions as a harbour authority); (s) a housing action trust established under Part 3 of the Housing Act 1988.

;

• (c) omit subsection (3).

15

In Schedule 1 (enfranchisement and extension by sub-tenants), omit paragraph 6(1).

16

In Schedule 2 (provisions supplementary to sections 17 and 18)—

• (a) in the heading of the Schedule, for “Sections 17 and 18” substitute “section 17”;

• (b) in paragraph 1(1), in the words before paragraph (a), omit “or 18”;

• (c) in paragraph 1(1)(a), omit “or 18(1)”;

• (d) in paragraph 1(1)(b), omit “or 18(4)”;

• (e) omit paragraph 1(2);

• (f) in paragraph 2(2), omit the words from “; and in a case” to “original term date”;

• (g) in paragraph 3(2), omit the words from “(or any earlier date” to “on the tenant)”;

• (h) in paragraph 3(3), omit “or 18”;

• (i) in paragraph 5(1), for “sections 17 and 18” substitute “section 17”;

• (j) omit paragraph 5(2);

• (k) in paragraph 7(3), omit “or 18”;

• (l) in paragraph 9(1), omit “or 18”.

17

In Schedule 3 (procedure)—

• (a) omit paragraph 7(3);

• (b) in paragraph 10, omit sub-paragraphs (2)(c) (and the “and” preceding it) and (4).

18

In Schedule 4 (covenants with local authorities etc), in paragraph 5(3), for “section 28(5)(c)” substitute “29(6ZA)”.

Consequential amendments to the LRHUDA 1993

19

The LRHUDA 1993 is amended in accordance with paragraphs 20 to 39.

20

In section 13(9) (initial notice for enfranchisement)—

• (a) omit paragraph (b) and the “or” preceding it;

• (b) omit the words from “or with the time” to “case may be)”.

21

Omit section 21(2)(c) (counter-notice for enfranchisement).

22

In section 22 (proceedings relating to validity of initial notice for enfranchisement)—

• (a) in subsection (1)(a), omit the words from “(whether” to “or (c) of that section)”;

• (b) in subsection (3), omit “(subject to subsection (4))”;

• (c) omit subsection (4).

23

In section 24(1)(b) (applications in enfranchisement where terms in dispute etc), omit “or section 23(5) or (6)”.

24

In section 25(1)(b) (applications in enfranchisement on failure to give counter-notice), omit “or section 23(5) or (6)”.

25

In section 33(4) (costs of enfranchisement), omit “23(4) or”.

26

In section 37A(8)(c)(i) (compensation for ineffective enfranchisement claim), omit “23(4),”.

27

In section 42(7) (notice of extension)—

• (a) omit paragraph (b) (and the “or” preceding it);

• (b) omit the words from “or with the time” to “case may be”).

28

Omit section 45(2)(c) (counter-notice for extension).

29

In section 46 (proceedings relating to validity of notice for extension)—

• (a) in subsection (1)(a), omit the words from “(whether” to “or (c) of that section)”;

• (b) in subsection (4), omit “(subject to subsection (5))”;

• (c) omit subsection (5).

30

In section 48(1)(b) (applications in extension where terms in dispute etc), omit “or section 47(4) or (5)”.

31

In section 49(1)(b) (applications in extension on failure to give counter-notice), omit “or section 47(4) or (5)”.

32

In section 54(6) (suspension of extension during enfranchisement)—

• (a) in paragraph (b)—

• (i) omit “or (c)”;

• (ii) omit “or 47(1)”;

• (b) in paragraph (c), omit “or 47(4)”.

33

In section 60(4) (costs incurred in connection with new lease), omit “47(1) or”.

34

In section 61A(6)(a) (compensation for ineffective extension claim), omit “47(1) or”.

35

In section 62(3)(a) (definitions), omit “47 or”.

36

In section 74 (effect of scheme applications on claims)—

• (a) in subsection (3)(c)—

• (i) omit “or 23”;

• (ii) for “either of those sections” substitute “that section”.

• (b) omit subsection (8)(b) and the “or” preceding it.

37

In Schedule 1 (conduct of proceedings by reversioner), omit paragraph 9 and the italic heading preceding it.

38

In Schedule 2 (special categories of landlord), in paragraph 2, omit sub-paragraphs (2) and (3).

39

In Schedule 11 (procedure where competent landlord is not tenant’s immediate landlord), omit paragraph 9 and the italic heading preceding it.

Schedule 4

Part 1 — Introduction

Determination and sharing of market value for purposes of section 37

1

• (1) This Schedule sets out how to determine, for the purposes of section 37, the market value on—

• (a) the transfer of a freehold house under the LRA 1967,

• (b) the grant of an extended lease of a house under the LRA 1967,

• (c) the collective enfranchisement of a building under the LRHUDA 1993, or

• (d) the grant of a new lease of a flat under the LRHUDA 1993.

• (2) This Schedule also sets out how to divide the market value into shares (where loss is suffered by certain landlords in addition to the landlord with responsibility for conducting the claim under the LRA 1967 or the LRHUDA 1993).

• (3) In this Schedule—

• “collective enfranchisement” means the collective enfranchisement of a building under the LRHUDA 1993;

• “freehold enfranchisement” means— the transfer of a freehold house under the LRA 1967, or a collective enfranchisement;

• “lease extension” means— the grant of an extended lease of a house under the LRA 1967, or the grant of a new lease of a flat under the LRHUDA 1993.

Part 2 — The market value

Freehold enfranchisements: the basis of the market value

2

• (1) The paragraph applies to a freehold enfranchisement.

• (2) The market value is the amount which the relevant freehold could have been expected to realise if it had been sold on the open market by a willing seller at the valuation date.

• (3) In the following provisions of this Schedule, that market value is referred to as the market value of the relevant freehold.

• (4) If the nominee purchaser acquires a leasehold interest in any property under section 21(4) of the LRHUDA 1993, but does not acquire the freehold of that property, a reference in this Schedule to the relevant freehold is a reference to the relevant freehold together with that leasehold interest.

Lease extensions: the basis of the market value

3

• (1) This paragraph applies to a lease extension.

• (2) It must be assumed that—

• (a) the current lease will continue on the terms on which it is granted, and therefore will not be substituted by the statutory lease;

• (b) the current lease will continue (on those terms) until its term date;

• (c) a notional lease is granted out of the interest of the person granting the statutory lease;

• (d) the notional lease is subject to, and enjoys the benefit of, the current lease (and therefore enjoys the right to receive the rent payable under the current lease);

• (e) the term of the notional lease begins on the date for valuation;

• (f) subject to that, the terms of the notional lease are the same as the terms of the statutory lease that will be granted under the LRA 1967 or the LRHUDA 1993, including the peppercorn rent (and any other rent payable under a shared ownership lease in respect of the landlord’s share), the property demised, and the term expiring 990 years after the term date of the current lease.

• (3) But if the tenant is holding over under the Local Government and Housing Act 1989 at the valuation date—

• (a) in the assumption in sub-paragraph (2)(a), the reference to the terms on which the current lease is granted has effect as a reference to the terms on which the tenant is holding over under that Act;

• (b) the assumption in sub-paragraph (2)(b) does not apply.

• (4) Paragraph 21 makes provision about whether any right to hold over under the Local Government and Housing Act 1989 is to be taken into consideration in determining the market value of the notional lease (if the tenant is not holding over under that Act at the valuation date).

• (5) The market value is the amount which the notional lease could have been expected to realise if it had been sold on the open market by a willing seller at the valuation date.

• (6) In the following provisions of this Schedule, that market value is referred to as the market value of the notional lease.

How the market value is determined

4

• (1) The market value of the relevant freehold or notional lease is to be determined in accordance with Part 3.

• (2) If the market value of different parts of the relevant freehold or notional lease are determined (in accordance with Part 3) in different ways, the market value is the total of the amounts determined in those ways.

• (3) Part 4 sets out—

• (a) assumptions that must be made in determining the market value of the relevant freehold or notional lease, and

• (b) certain matters that must, or must not, be taken into consideration in determining the market value.

Part 3 — Determining the market value

Compulsory use of the standard valuation method

5

• (1) The standard valuation method (see Part 5 of this Schedule) must be used to determine the market value of the relevant freehold or notional lease for the purposes of this Schedule.

• (2) But this Schedule does not require the standard valuation method to be used to determine the market value of—

• (a) the relevant freehold or notional lease if all of the property comprised in that freehold or lease is property for which the standard valuation method is not compulsory, or

• (b) any part or parts of the relevant freehold or notional lease which comprise property for which the standard valuation method is not compulsory.

• (3) Paragraphs 6 to 13 contain provision about the kinds of property for which the standard valuation method is not compulsory.

• (4) Paragraphs 6 to 8 apply in relation to any kind of freehold enfranchisement or lease extension.

• (5) Paragraphs 9 to 13 specify the kinds of freehold enfranchisement or lease extension to which they apply.

Tenant holding over or unexpired term of 5 years or less

6

The standard valuation method is not compulsory for the property comprised in a current lease if—

• (a) the tenant is holding over under the Local Government and Housing Act 1989 at the valuation date, or

• (b) the term date of the current lease is within the period of five years beginning at the valuation date.

Home finance plan leases

7

• (1) The standard valuation method is not compulsory for the property comprised in a current lease if it is an excepted home finance plan lease at the valuation date.

• (2) An “excepted home finance plan lease” is a home finance plan lease within the meaning of section 2(9) of the LR(GR)A 2022 which meets any further specified conditions as mentioned in section 2(8)(b) of that Act.

Market rack rent leases

8

• (1) The standard valuation method is not compulsory for the property comprised in a current lease if it is a market rack rent lease at the valuation date.

• (2) If section 3(3) of the LRA 1967 applies to the current lease (successive leases treated as a single lease), sub-paragraph (1) is to apply only if the one of those leases which is in effect at the valuation date is a market rack rent lease.

• (3) A “market rack rent lease” is a lease which—

• (a) was granted—

• (i) for no premium, or

• (ii) for a premium which was low relative to the value of the freehold of the property with vacant possession at the time of the grant,

• (b) was granted at a market rack rent, and

• (c) the parties entered into with the intention that the rent would be a market rack rent.

• (4) In this paragraph “market rack rent” means a rent which was, or was reasonably close to, a market rack rent at the time of the grant.

Property included in the acquisition of a freehold house under section 2(4) of the LRA 1967

9

• (1) This paragraph applies only to—

• (a) the transfer of a freehold house under the LRA 1967, or

• (b) the grant of an extended lease of a house under the LRA 1967.

• (2) The standard valuation method is not compulsory for any parts of the property comprised in the newly owned premises that are included by virtue of section 2(4) of the LRA 1967 (separately let property enjoyed with the house).

Leases already extended under the old law in the LRA 1967

10

• (1) This paragraph applies only to—

• (a) the transfer of a freehold house under the LRA 1967, or

• (b) the grant of an extended lease of a house under the LRA 1967.

• (2) The standard valuation method is not compulsory for the property comprised in the current lease if that lease is a pre-commencement lease granted under section 14 of the LRA 1967.

• (3) A lease granted under section 14 of the LRA 1967 is a “pre-commencement” lease unless it is granted in accordance with sections 14 and 15 of the LRA 1967 as amended by sections 33(1) and 34 of this Act (under which a lease will be extended by 990 years at a peppercorn rent on payment of a premium).

Business tenancies

11

• (1) This paragraph applies only to—

• (a) the transfer of a freehold house under the LRA 1967, or

• (b) the grant of an extended lease of a house under the LRA 1967.

• (2) The standard valuation method is not compulsory for the property comprised in the current lease if that lease is a tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies (see section 1(1ZC) of the LRA 1967).

Acquisition of a freehold house under the LRA 1967: shared ownership leases

12

• (1) This paragraph applies only to the transfer of a freehold house under the LRA 1967.

• (2) The standard valuation method is not compulsory for any property comprised in the newly owned premises if it, or any part of it, is demised by a shared ownership lease.

Collective enfranchisement: property other than relevant flats etc and appurtenant property

13

• (1) This paragraph applies only to a collective enfranchisement.

• (2) The requirement under paragraph 5(1) to use the standard valuation method applies only in relation to property comprised in the newly owned premises that is—

• (a) a relevant flat, or

• (b) appurtenant property leased with a relevant flat.

• (3) Accordingly, the standard valuation method is not compulsory for any other property comprised in the newly owned premises.

• (4) A flat is a “relevant flat” for the purposes of this paragraph if the flat is—

• (a) demised to a qualifying tenant, or

• (b) demised to a person who is not a qualifying tenant, but only because of section 5(5) and (6) of the LRHUDA 1993 (a person who is the tenant of three or more flats in the building).

• (5) But a flat is not a relevant flat if—

• (a) it, or any part of it, is demised by a lease which the nominee purchaser could acquire, but is not acquiring, under paragraph 2(5) of Schedule A1 to the LRHUDA 1993 (acquisition of intermediate leases);

• (b) it, or any part of it, is demised by a shared ownership lease.

• (6) Appurtenant property is “leased with” a relevant flat for the purposes of this paragraph if—

• (a) the appurtenant property and the relevant flat are leased under the same lease (including where, under section 7(6) of the LRHUDA 1993, two or more leases are treated as a single lease), and

• (b) by virtue of that lease, the tenant is a qualifying tenant or, but for the impediment referred to in sub-paragraph (4)(b), would be a qualifying tenant.

• (7) By virtue of paragraph 1(1)(c) of Schedule 6, the references in this paragraph to a flat, a qualifying tenant, appurtenant property or a shared ownership lease have the same meanings that they have in Chapter 1 of Part 1 of the LRHUDA 1993 (see, respectively, sections 101(1), 5, 1(7) and 101(1) of that Act).

Voluntary use of the standard valuation method

14

This Scheduledoes not prevent the standard valuation method from being used to determine the market value of property comprised in the relevant freehold or notional lease for which the standard valuation method is not compulsory.

Property that is “subject to the standard valuation method”

15

Property comprised in the relevant freehold or notional lease is “subject to the standard valuation method” if—

• (a) this Part of this Schedule requires the standard valuation method to be used in relation to the property, or

• (b) the standard valuation method is to be used (otherwise than where its use is required by this Part of this Schedule) in relation to the property.

Part 4 — Assumptions and other matters affecting determination of market value

Application of this Part of this Schedule

16

• (1) This Part of this Schedule, except for paragraph 22, applies to the determination of the market value in accordance with this Schedule—

• (a) whether or not the standard valuation method is being used, and

• (b) whether or not that method is being used because this Schedule requires its use.

• (2) Paragraph 22 applies to the determination of the market value in accordance with this Schedule only if the standard valuation method is being used.

Assumptions in all cases: intermediate leases merged and no marriage or hope value

17

• (1) This paragraph applies when determining the market value of the relevant freehold (on any freehold enfranchisement) or notional lease (on any lease extension).

• (2) Assumption 1: it must be assumed that the following occurred immediately before the valuation date—

• (a) in the case of the transfer of a freehold house under the LRA 1967—

• (i) the merger with the freehold of any lease which the claimant will acquire as part of the statutory transfer;

• (ii) the surrender of any lease of the currently leased premises that belongs to the qualifying tenant and is superior to the current lease;

• (b) in the case of the grant of an extended lease of a house under the LRA 1967—

• (i) the merger with the interest of the person granting the statutory lease of any lease which will be deemed to be surrendered and regranted as part of the statutory grant;

• (ii) the surrender of any lease that will be surrendered under paragraph 11(1) of Schedule 1 to the LRA 1967 as part of the statutory grant;

• (c) in the case of the collective enfranchisement of a building under the LRHUDA 1993, the merger with the freehold of any lease which the claimant will acquire as part of the enfranchisement;

• (d) in the case of the grant of a new lease of a flat under the LRHUDA 1993—

• (i) the merger with the interest of the person granting the statutory lease of any lease which will be deemed to be surrendered and regranted as part of the statutory grant;

• (ii) the surrender of any lease that will be surrendered under paragraph 10(3) of Schedule 11 to the LRHUDA 1993 as part of the statutory grant.

• (3) Assumption 2: it must be assumed (having made assumption 1) that—

• (a) the claimant is not seeking, and will never seek, to acquire the relevant freehold or notional lease;

• (b) in the case of a collective enfranchisement, the nominee purchaser is not seeking, and will never seek, to acquire the relevant freehold;

• (c) any persons holding any leasehold interests in the newly owned premises or any part of those premises (including, in the case of a collective enfranchisement, the qualifying tenants) are not seeking, and will never seek—

• (i) to acquire the relevant freehold or notional lease, or

• (ii) to dispose of their leasehold interests;

• (d) in the case of a lease extension, the freeholder is not seeking, and will never seek, to acquire the notional lease or to dispose of their freehold interest; and

• (e) in the case of a freehold enfranchisement where there are two or more freeholders, none of them is seeking, or will ever seek, to acquire any of the relevant freehold which they do not already own.

Accordingly, no marriage or hope value is payable.

• (4) This paragraph does not prevent other assumptions from being made when determining the market value as long as they are consistent with assumptions 1 and 2 and the other provisions of this Schedule.

• (5) In this paragraph “claimant” means the person or persons making the claim under the LRA 1967 or the LRHUDA 1993 for the freehold enfranchisement or lease extension.

Additional assumption on transfer of freehold house or lease extension: repairing obligations and improvements

18

• (1) This paragraph applies when determining the market value of—

• (a) the relevant freehold on the transfer of a freehold house under the LRA 1967, or

• (b) the notional lease on a lease extension.

• (2) Assumption 3: it must be assumed—

• (a) that the qualifying tenant has complied with any tenant’s repairing obligations under the current lease at the valuation date, so that the property has not been devalued by any breach of those obligations, and

• (b) that any improvements to the currently leased premises that have been made by any tenant under the current lease (including the current tenant) at the tenant’s own expense have not been made, unless they were required to be made by any tenant’s repairing obligations under the lease.

• (3) In the case of the transfer of a freehold house, if section 3(3) of the LRA 1967 applies to the current lease (successive leases treated as single lease), assumption 3 is to apply only to the one of those leases which is in effect at the valuation date.

• (4) This paragraph does not prevent other assumptions from being made when determining the market value as long as they are consistent with assumption 3 and the other provisions of this Schedule.

• (5) In this paragraph “tenant’s repairing obligation”, in relation to a lease, means an obligation under the lease (however expressed or described) for the tenant under the lease to repair, maintain or decorate the currently leased premises.

Additional assumptions on collective enfranchisements: repairing obligations, improvements & leasebacks

19

• (1) This paragraph applies when determining the market value of the relevant freehold on a collective enfranchisement.

• (2) Assumption 4: it must be assumed—

• (a) as respects each current lease held by a relevant tenant, that the relevant tenant has complied with any tenant’s repairing obligations under the lease at the valuation date, so that the property has not been devalued by any breach of those obligations, and

• (b) as respects each current lease held by a participating tenant, any improvements to the currently leased premises that have been made by any tenant under the lease (including the participating tenant) at the tenant’s own expense have not been made, unless they were required to be made by any tenant’s repairing obligations under the lease.

• (3) Assumption 5: it must be assumed that the relevant freehold is subject to any leases to be granted in accordance with section 36 of the LRHUDA 1993.

• (4) This paragraph does not prevent other assumptions from being made when determining the market value as long as they are consistent with assumptions 4 and 5 and the other provisions of this Schedule.

• (5) In this paragraph—

• “relevant tenant” means— a qualifying tenant, or a person who is not a qualifying tenant, but only because of section 5(5) and (6) of the LRHUDA 1993 (a person who is the tenant of three or more flats in the building);

• “tenant’s repairing obligation”, in relation to a lease, means an obligation under the lease (however expressed or described) for the tenant under the lease to repair, maintain or decorate the currently leased premises.

Any determination of market value: specified matters to be taken into consideration

20

• (1) This paragraph applies if any specified matters arise in relation to newly owned premises.

• (2) The specified matters that arise must be taken into consideration when determining the market value of those premises.

• (3) If the standard valuation method is being used to determine the market value (on any freehold enfranchisement or lease extension), the effect of those specified matters on the market value, including during the period between—

• (a) the valuation date, and

• (b) the term date of the current lease,

must be taken into consideration.

• (4) In this paragraph “specified matters” means—

• (a) any defects in the title to the relevant freehold or statutory lease;

• (b) any property rights that burden or benefit the title to the relevant freehold or statutory lease;

• (c) any burden on, or benefit to, the title to the relevant freehold or statutory lease that arises under or by virtue of legislation (including any permanent or extended rights and burdens that are to be created in order to give effect to section 10 of the LRA 1967 or Schedule 7 to the LRHUDA 1993) or any other law;

• (d) any physical characteristics of the newly owned premises giving rise to a liability under or by virtue of legislation or any other law;

• (e) any order of a court or tribunal enforceable against the relevant freehold or statutory lease;

• (f) any obligation in a contract or other arrangement—

• (i) which runs with the newly owned premises, or

• (ii) which will bind the owner for the time being of the relevant freehold or statutory lease (including where the owner for the time being is required to ensure that an immediate successor in title enters into the obligation, in particular by a limitation on transfer of the title to the relevant freehold or statutory lease or on registration of such a transfer).

• (5) But, as this paragraph has effect subject to any assumptions that must be made in accordance with other provisions of this Schedule, the effect of those assumptions must form part of the determination of what, if any, specified matters arise.

• (6) In this paragraph “legislation” means—

• (a) an Act of Parliament or Act of Senedd, or

• (b) any instrument made under an Act of Parliament or Act of Senedd.

Any determination of market value: current lease gives rise to a right to hold over

21

• (1) This paragraph applies when determining the market value of the relevant freehold or the notional lease if—

• (a) some or all of the newly owned premises are comprised in a current lease which gives rise to a right to hold over under the Local Government and Housing Act 1989, and

• (b) the tenant is not holding over under that Act at the valuation date.

• (2) That right to hold over, and the likelihood of that right being exercised, is to be taken into consideration in determining the market value only if—

• (a) the term date of the current lease is within the period of five years beginning at the valuation date, and

• (b) that right to hold over is likely to be exercised.

Standard valuation method: other matters

22

• (1) This paragraph applies if the standard valuation method is used to determine the market value.

• (2) In the case of a lease extension, if the terms of the notional lease differ from the terms of the current lease, the effect of that difference on the market value during the period between—

• (a) the valuation date, and

• (b) the term date of the current lease,

must be taken into consideration when determining the market value of the notional lease.

• (3) In the case of a collective enfranchisement, this Schedule applies with the modification in sub-paragraph (4) if any property comprised in the newly owned premises is demised under a lease, or part of a lease, which the nominee purchaser could not acquire under paragraph 2 of Schedule A1 to the LRHUDA 1993 because of paragraph2(7) (the tenant under that superior lease is also the qualifying tenant).

• (4) In the application of this Schedule to the use of the standard valuation method to value that property, any reference to the current lease has effect as a reference to the lease, or the part of the lease, that could not be acquired under paragraph2(7) of Schedule A1 to the LRHUDA 1993.

Enfranchisement of house or lease extension: tenant with superior lease

23

• (1) This paragraph applies when determining—

• (a) the market value of the relevant freehold on the transfer of a freehold house under the LRA 1967, or

• (b) the market value of the notional lease on a lease extension,

if the qualifying tenant is also the tenant of a relevant superior lease.

• (2) A “relevant superior lease” is a lease that—

• (a) is superior to the current lease, and

• (b) in accordance with paragraph 17(2)(a)(ii), (b)(ii) or (d)(ii) must be assumed to have been surrendered.

• (3) After the application of the other provisions of this Schedule for the purposes of calculating the market value, including the assumptions in paragraph 17(2)—

• (a) the amount produced by the application of those other provisions must be reduced to take account of the value of the relevant superior lease, and

• (b) the amount produced after that reduction is the market value.

Part 5 — The standard valuation method

Introduction

24

• (1) This Part of this Schedule sets out the standard valuation method.

• (2) The standard valuation method consists of steps 1 to 3 (see paragraph 25, paragraph 27 or 28, and paragraph 29).

• (3) There are two versions of step 2—

• (a) the version in paragraph 27 applies to freehold enfranchisements;

• (b) the version in paragraph 28 applies to lease extensions.

Step 1: determine the value of right to receive rent (the “term value”)

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• (1) Step 1: determine the value of the right to receive rent over the remainder of the term of the current lease.

• (2) The “right to receive rent” is—

• (a) in the case of a freehold acquisition, the landlord’s right to receive the rent under the current lease;

• (b) in the case of a lease extension, the right of the tenant under the notional lease to receive the rent under the current lease.

Paragraph 26 contains provision about the rent that is to be used in step 1, including if and when a capped notional rent is to be used.

• (3) In the case of a collective enfranchisement, step 1 is to be followed separately in relation to each current lease.

• (4) In this Schedule the value determined under step 1 in relation to a lease is referred to as the “term value” of the lease.

• (5) Part 7 of this Schedule contains provision about the determination of the term value under this paragraph.

• (6) But, if there is no rent under a lease, or the rent under a lease is only a peppercorn rent, the term value of the lease is nil (and so sub-paragraph (5) does not apply).

• (7) If a current lease is a deemed single lease, step 1 is to be followed separately in relation to each constituent lease (as if the constituent lease were itself a current lease).

• (8) In this paragraph “rent” has the same meaning as in the LR(GR)A 2022 (see section 22(2) and (3) of that Act).

Rent (including a notional capped rent) that is to be used for determining the term value

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• (1) The rent under the current lease must be used in step 1 to determine the lease’s term value.

• (2) If only some of the property demised by the current lease is subject to the standard valuation method, the rent under the lease that is attributable to that property must be used in step 1.

• (3) But, as respects any period when the notional annual rent for the current lease is lower than the actual annual rent, the notional annual rent must be used instead (and accordingly sub-paragraphs (1) and (2) are not to apply in relation to that period).

• (4) The “notional annual rent” for the current lease is an amount equivalent to 0.1% of the market value of the premises being valued.

• (5) The “premises being valued” are the premises that—

• (a) are demised by the current lease, and

• (b) are subject to the standard valuation method.

• (6) The “market value” of the premises being valued is—

• (a) in the case of a freehold enfranchisement, or lease extension, under the LRA 1967, the amount which the freehold of the premises being valued could have been expected to realise if it had been sold on the open market with vacant possession by a willing seller at the valuation date;

• (b) in the case of a collective enfranchisement or lease extension under the LRHUDA 1993, the share of the relevant freehold market value which is attributable to the premises being valued.

• (7) The “relevant freehold market value” is —

• (a) in the case of a collective enfranchisement, the amount which the freehold to be acquired on the collective enfranchisement could have been expected to realise if it had been sold on the open market with vacant possession by a willing seller at the valuation date;

• (b) in the case of a lease extension under the LRHUDA 1993, the amount which the freehold of the building and any other land which contain the premises being valued could have been expected to realise if it had been sold on the open market with vacant possession by a willing seller at the valuation date.

• (8) The “actual annual rent” is the rent referred to in sub-paragraph (1) or (2).

• (9) The notional annual rent must not be used in step 1 if—

• (a) no premium was payable on the grant of the current lease, or

• (b) the current lease was granted on the basis that—

• (i) the premium was lower, and the rent was higher, than each would otherwise have been, and

• (ii) the value of paying the lower premium was (at the time of the grant) broadly equivalent to, or greater than, the capitalised value of the extra rent.

• (10) It must be assumed that sub-paragraph (9)(b) is not applicable unless it is shown to be applicable.

• (11) If section 3(3) of the LRA 1967 applies to the current lease (successive leases treated as a single lease), sub-paragraph (9) is to apply only if the one of those leases which is in effect at the valuation date meets the condition in sub-paragraph (9)(a) or (b).

• (12) If the current lease is a shared ownership lease—

• (a) the rent that is to be used for the purposes of sub-paragraph (1) and (2) is the rent that is payable under the lease in respect of the tenant’s share in the property demised by the lease;

• (b) where the lease does not reserve separate rents in respect of the tenant’s share in the demised premises and the landlord’s share in the property demised by the lease, any rent reserved is to be treated as reserved in respect of the landlord’s share.

Step 2 (freehold enfranchisement): determine the value of the freehold reversion (the “reversion value”)

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• (1) This version of step 2 applies to freehold enfranchisements.

• (2) Step 2: for the newly owned premises which are subject to the standard valuation method (the “premises being valued”)—

• (a) determine the market value of those premises, and

• (b) then reduce that market value by using this formula:

$$v 1 + d n$ where— d is the applicable deferment rate; n is the period (in years) that begins with the valuation date and ends at the end of the term of the current lease; v is the market value.$

• (3) The “market value” of the premises being valued is—

• (a) in the case of the transfer of a freehold house under the LRA 1967, the amount which the freehold of the premises being valued could have been expected to realise if it had been sold on the open market with vacant possession by a willing seller at the valuation date;

• (b) in the case of a collective enfranchisement, the share of the relevant freehold market value which is attributable to the premises being valued.

• (4) The “relevant freehold market value” is the amount which the freehold to be acquired on the collective enfranchisement could have been expected to realise if it had been sold on the open market with vacant possession by a willing seller at the valuation date.