Fairer, more secure and an end to a life-sentence of misery for 4.5m leaseholders. Some of the biggest reforms to English property law for forty years have been revealed by the government as it vows to end complex leaseholds costs.
Housing secretary, Robert Jenrick, has announced that almost 4.5m UK leaseholders will be offered the right to extend their lease by a maximum term of 990 years at zero ground rent, putting an end to the existing law which sees millions at the mercy of landlords who can increase ground rent and fees making the property almost impossible to sell in some circumstances.
The changes announced today will mean that leaseholders who opt to extend the lease on their home will no longer pay any ground rent to the freeholder, potentially saving tens of thousands of pounds.
The Housing Secretary said: “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 homeownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners. These reforms provide fairness for 4.5 million leaseholders and chart a course to a new system altogether.”
As the rules stand at the moment, there is a disparity between the leaseholders of houses and leaseholders of flats. Owners of houses can only extend their lease once for 50 years with a ground rent. However, leaseholders of flats can extend as often as they wish at zero ground rent for 90 years. The new reforms now mean that both house and flat leaseholders will be able to extend their lease to a new standard 990 years with a ground rent at zero.
A cap will also be introduced on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder.
Under the proposed plans, prohibitive costs like ‘marriage value’, which represents the increase in the value of the property once the lease has been extended, will be also be abolished - after recommendations by the Law Commission.
The government also highlighted that an online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease and further measures were also announced to protect those who own homes built specifically for older people.
The announcements were welcomed by Propertymark who has campaigned for years on the issue.
Mark Hayward, chief policy adviser, NAEA Propertymark, said: “We have campaigned for years for changes to the leasehold system and event fees on retirement homes. The issue of escalating ground rent on leasehold homes has been a long term scandal which has left many owners trapped and unable to sell their houses.
"Our research ‘Leasehold: a Life Sentence’ in 2018 found that 46% of leasehold house owners were unaware of the escalating ground rent when they purchased their property. Over one million households in the UK are sold through a leasehold, and this new legislation will go a long way to help thousands of homeowners caught in a leasehold trap.
"However, while we welcome the Government’s initiative to reduce ground rents to zero for all new retirement properties, we would argue this needs to be extended to all retirement properties to create a level playing field. Event fees remain a hugely contentious issue which many consumers still don’t understand so we need as much clarity and transparency as possible.”