Leasehold and Freehold Reform Act 2024

Part 6 Entitlement of eligible persons to shares of the market value

Entitlement and calculation of share

30 (1) This Part of this Schedule applies if there are two or more eligible persons.

(2) Each eligible person is entitled to be paid a share of the market value of the relevant freehold or notional lease that is determined in accordance with this Schedule.

(3) An eligible person’s share of the market value is to be determined using this formula—

Freehold enfranchisements: the “eligible persons” and “qualifying transactions”

31 (1) A person is an “eligible person” if the whole or a part of a relevant interest of the person is acquired on a freehold enfranchisement.

(2) The eligible person’s “qualifying transaction” is the acquisition of the whole or the part of the person’s relevant interest.

(3) But if—

(a) an eligible person’s relevant interest is a freehold, and

(b) that person is granted a lease in accordance with section 36 of the LRHUDA 1993,

that person’s qualifying transaction is the acquisition of the freehold together with the grant of that lease.

Lease extensions: the “eligible persons” and “qualifying transactions”

32 (1) In the case of a lease extension, a person is an “eligible person” if —

(a) the statutory lease is granted in whole or in part out of a relevant interest of the person, or

(b) the whole or a part of a relevant interest of the person is deemed to be surrendered and regranted under the LRA 1967 or the LRHUDA 1993 as a result of the claim for the lease extension, or

(c) the person is the landlord under a lease which is varied under paragraph 12A of Schedule 1 to the LRA 1967 or paragraph 12 of Schedule 11 to the LRHUDA 1993 as a result of the lease extension.

(2) The eligible person’s “qualifying transaction” is—

(a) where sub-paragraph (1)(a) or (b) applies, the grant of the statutory lease, or

(b) where sub-paragraph (1)(c) applies, the variation of the lease.

The loss suffered

33 (1) The loss suffered by an eligible person is the loss which the person suffers as a result of the person’s qualifying transaction (taking into account, where paragraph 32(1)(c) applies, any reduction under paragraph 12A of Schedule 1 to the LRA 1967 or paragraph 12 of Schedule 11 to the LRHUDA 1993 in the rent of a lease of which the eligible person is a tenant).

(2) In determining the loss suffered by an eligible person, assumption 2 (in paragraph 17(3)) must be made in relation to the person’s qualifying transaction and, accordingly, no marriage or hope value is taken into account in determining the loss.

(3) In determining the loss suffered by an eligible person, the value of the eligible person’s relevant interest must not be increased by reason of—

(a) any transaction which—

(i) is entered into on or after the relevant date (otherwise than in pursuance of a contract entered into before the relevant date), and

(ii) involves the creation or transfer of an interest superior to (whether or not preceding) any interest held by a relevant tenant, or

(b) any alteration on or after the relevant date of the terms on which any such superior interest is held.

(4) In this paragraph—

• “eligible person’s relevant interest” means the relevant interest to which the eligible person’s qualifying transaction relates;

• “relevant date” means—

  (a)

  15 February 1979, in relation to the transfer of a freehold house under the LRA 1967;

  (b)

  20 July 1993, in relation to—

  (i)

  the collective enfranchisement of a building under the LRHUDA 1993, or

  (ii)

  the grant of a new lease of a flat under the LRHUDA 1993;

  (c)

  27 November 2023, in relation to the grant of an extended lease of a house under the LRA 1967;

• “relevant tenant” means—

  (a)

  a qualifying tenant, or

  (b)

  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).

Interpretation

34 In this Part of this Schedule—

• “eligible person” has the meaning given in paragraph 31 or 32;

• “qualifying transaction” has the meaning given in paragraph 31 or 32;

• “relevant interest” means an interest in property that forms the whole or a part of—

  (a)

  the currently leased premises, or

  (b)

  the newly owned premises.