Millions of leaseholders to benefit after the government unveils the biggest shake-up of property laws for 40 years
Up to 4.5 million leaseholders across England and Wales could soon be much better off after the government outlined the first steps in putting an end to what many see as a feudal system of homeownership.
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Housing Secretary Robert Jenrick said today that all leaseholders in the two countries will be able to extend their leases by 990 years and get rid of the ground rent.
The news will be especially welcomed by the following groups:
- Those in leasehold houses
- Those in flats with leases under or approaching 80 years
- Those with so-called ‘onerous’ ground rents that make their properties unsaleable
At the moment, people in these groups either face massive costs to extend their leases or are unable to extend them for a worthwhile number of years.
In recent years developers have come under fire for selling houses as leasehold instead of freehold, and also for adding clauses that mean the ground rent on properties doubles every 10 or 15 years.
Banks have started to shy away from lending on such properties, leaving many with homes they can’t sell.
A 'fairer' system
The government said the new measures will make homeownership “fairer”, and it's likely that eventually, all leaseholders will benefit.
This is because getting rid of ground rent takes away the income of freeholders; without this there will be little reason for the leasehold system of ownership to continue.
Sebastian O’Kelly of Leasehold Knowledge Partnership, a charity that represents leaseholders and has campaigned for changes to the law, said: “The ground rent ban, which is going to come in in the next 12 months, is going to reset the whole culture of leasehold. It means leasehold doesn’t have a future.”
The government seems to be of a similar view and also said today it is setting up a Commonhold Council to prepare for the “widespread take-up of commonhold”.
Under the proposed commonhold model, flat owners would jointly own their blocks. This would give them control over service charges and end the rip-off fees charged by many freeholders for things such as letting a property, owning a pet or making changes to their properties.
Longer leases ahead
Under current rules, leaseholders of houses can only extend their lease once by 50 years and the ground rent remains. Leaseholders in flats can extend as many times as they like for 90 years at a time, with zero ground rent.
The new rules will allow all leaseholders to extend their lease by 990 years and get rid of the ground rent.
No more haggling
What’s especially important is that the government said it will set up a calculator to determine the cost of extending a lease.
At the moment the cost of an extension is not set in stone and leaseholders often end up spending lots of money paying professionals to argue over the price.
“This will take the whole smoke and mirrors calculations out of the hands of the freeholder because at the moment it is kind of a haggling operation,” said O’Kelly.
“This will end the court cases and the endless negotiation over lease extensions and enfranchisement and the huge amounts of money that are made by lawyers, valuers and freeholders above all.”
Ending marriage value
Another huge plus is that the government is scrapping what’s known as ‘marriage value’. This is a something that becomes payable once a lease has dropped below 80 years.
It adds huge costs to the process of extending a lease and has meant many flat owners with short leases have not been able to afford an extension.
Although it’s not yet clear exactly when these changes will come into play, the government said legislation will be brought forward in the upcoming session of parliament.
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Featured image: Ralf Gosch / Shutterstock