What Will Leasehold Reform Mean For Me?20th Apr 2021
Extend Your Lease, No More Ground Rent
Leasehold reform is excellent news for leaseholders in the form of 990-year leases and the government’s further commitment to zero ‘peppercorn’ ground rents. But this is a complex area of the law so it pays to get expert advice.
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What Is Changing Under New Leasehold Reforms?
Millions of leaseholders will get the right to extend their lease by up to 990 years under reforms announced earlier this year by Housing Secretary Robert Jenrick. At present, lease extensions are usually limited to 90 years.
‘Marriage values’ – which increase the cost of extending a lease when it drops below 80 years – will be abolished, making the whole process cheaper for those whose lease length has dropped below this crucial threshold.
More ground rents will be reduced to a zero ‘peppercorn’ (though this provision already exists for most leaseholders). The government is extending the protection to retirement leasehold properties “so purchasers of these homes have the same rights as other homeowners and are protected from uncertain and rip-off practices”. Worried that your ground rent is too high? Book a free chat with a leasehold solicitor to see how it can be reduced.
Other proposed measures include:
- An online calculator to make it easier to work out how much it’ll cost you to buy the freehold or extend your lease. The calculator will be created by the government.
- Leaseholders will be able to agree voluntarily to a restriction on future development of their property to avoid paying ‘development value’.
- A new government-created Commonhold Council will “prepare homeowners and the market for the widespread take-up of commonhold” property. Commonhold is a system used in Australia, the USA and parts of Europe. It is an alternative to long leases, allowing you to own the freehold of flats, houses and non-residential units (with no time limit). The new Commonhold Council will comprise leasehold groups, industry and government.
Bad News For Freeholders
All of the above will make uncomfortable reading for freeholders: their property investments will be worth less. They will receive nothing in ground rents – and they will no longer receive marriage value payouts when negotiating extensions of ‘below 80-year’ leases.
The news will also leave a bittersweet taste for any leaseholders who’ve just had to fork out a hefty marriage value payment (for no perceived value) when extending a lease that’s fallen below 80 years. They’ll be wondering why they’ve just had to line their freeholder’s pockets – while others in future will be able to get a lease extension for much less.
Two Cheers For Leasehold Reform
Leaseholders should reserve the third cheer for when all this actually happens. Pop the champagne corks now and you could find the bubbly tastes a little flat by the time this new legislation actually gets the Royal Assent.
Remember…the government has not yet committed to a timetable – thought it has said the new legislation will go before the current parliament.
And the proposals are likely to face opposition from some powerful, well-orchestrated and well-funded property lobbies with a lot to lose. Major freeholders could put up quite a fight in a bid to get the proposals watered down.
Further Reading…
- What the leasehold 80-year rule and marriage value mean for you – read more…
- How to deal with doubling ground rent – read more…
- Stop Taylor Wimpey’s ground rent from doubling – read more…
- What is freehold property? – read more…
- Be secretive when buying a share of the freehold – read more…
Find Out More, Get Expert Advice
Is your lease about to fall below the crucial 80-year mark? Has it already done so? Not sure whether you should buy the freehold or extend your lease? Worried about the cost? Get expert legal advice from Coles Miller leasehold solicitor Nick Leedham.
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This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.
