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Robert Irving Burns

Leasehold Law Changes: What are the Key Proposals and How Do They Affect Leaseholders?

May 13, 2021    |   Robert Irving Burns

The government recently proposed some major changes to the leasehold laws, which could come into effect in as little as two years’ time.

If you own a leasehold property, it’s likely that these amendments will affect you. Here’s more information about the changes.

The leasehold law changes

Lease extension at zero ground rent

Housing Secretary Robert Jenrick announced that in the future, leaseholders will have the right to extend their lease to a term of 990 years. This is a significant increase (up from 90 years for flats and 50 years for houses). They also won’t have to pay ground rent.

At present, many leaseholders have to pay ground rent, which in combination with a mortgage, can be expensive. Freeholders are permitted to raise ground rent charges whenever they wish, with seemingly no benefit to the leaseholders that own a property in their building.

The proposed changes will enable leaseholders to extend the lease on their property without paying ground rent to the freeholder – and will mean that they’ll own their home without having to pay any extra expenses. Over time, this could save leaseholders considerable sums of money.

Introducing the commonhold model

There are also plans to create a Commonhold Council. This will be a partnership of leasehold groups and figures in the industry, working alongside the government to pave the way for the take-up of the commonhold model in the country.

Commonhold permits homeowners to take freehold ownership of their property, along with every other homeowner in the block. That means that their home is entirely theirs until they decide to sell.

Ground rent cap

The government are also introducing a cap on the amount of ground rent a leaseholder has to pay, if they extend the lease length or become the freeholder. Other expensive charges like ‘marriage value’ (when properties have less than 80 years left on the lease) will also be cancelled, to make owning a leasehold property more affordable for homeowners.

Protecting retirement leaseholders

Additionally, the government has suggested that the same ‘zero ground rent’ terms will apply to retirement leasehold properties – i.e., homes that have been built specifically for elderly people. The aim is to protect older homeowners from being financially exploited, and to give them the same rights as other homeowners in the country.

Development restrictions

Understandably, freeholders who own a block of apartments may be concerned about leaseholders taking full ownership of their property, then developing it in some way that will be detrimental to the building as a whole. The government has introduced a fee for ‘development value’ – which leaseholders can avoid paying, if they agree to a restriction on any developments of their home in the future.

What’s driving the changes?

The goal is to make purchasing a property a more even playing-field for homeowners. Robert Jenrick commented: “Across the country, people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive.

We want to reinforce the security that home ownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners.”

The first stage of legislation is due to be introduced in the next session of Parliament, with a view to the changes being brought in over the next few years.

If you would like further information on the proposed changes to leasehold laws, get in touch with us today using the contact details below.

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