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Government make reforms to leasehold housing

Jessica Nangle

January 7, 2021

Housing Secretary Robert Jenrick has today revealed that millions of leaseholders will be given the right to extend their lease by a maximum term of 990 years at zero ground rent.

These measures come as part of the biggest reforms to English property law for 40 years in an effort to make home ownership “fairer and more secure”.

Under the current law many people face high ground rents, which combined with a mortgage, can make it feel like they are paying rent on a property they own.

Freeholders can increase the amount of ground rent with little or no benefit seen to those faced with extra charges.

It can also lengthen and lead to increased costs when buying or selling the property.

Today’s changes will mean that any leaseholder who chooses to extend their lease on their home will no longer pay any ground rent to the freeholder, enabling those who want to fully own their home to be able to do so without “cumbersome bureaucracy and additional, unnecessary and unfair expenses”.

The government suggests that for some leaseholders, these changes could save them thousands to tens of thousands of pounds.

Robert Jenrick 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 home ownership 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.”

The government is also now establishing a Commonhold Council – a partnership of leasehold groups, industry and government – that will prepare homeowners and the market for the widespread take-up of commonhold.

The commonhold model is widely used around the world and allows homeowners to own their property on a freehold basis, giving them greater control over the costs of home ownership.

Blocks are jointly owned and managed, meaning when someone buys a flat or a house, it is truly theirs and any decisions about its future are theirs too.

Professor Nick Hopkins, commissioner for property law at the Law Commission, added: “We are pleased to see government taking its first decisive step towards the implementation of the Law Commission’s recommendations to make enfranchisement cheaper and simpler.

“The creation of the Commonhold Council should help to reinvigorate commonhold, ensuring homeowners will be able to call their homes their own.”

A cap will also be introduced on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder.

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.

The government is also abolishing prohibitive costs like ‘marriage value’ and set the calculation rates to ensure this is fairer, cheaper and more transparent.

These measures will also apply 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.

Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’.

Legislation will be brought forward in the upcoming session of Parliament, to set future ground rents to zero.

Nick Sanderson, chief executive at Audley Group, said: “Reforms to leasehold are welcome and the creation of a taskforce underlines the government’s intent to make continued change in this part of the property market.

“In housing with care schemes leasehold has been used where there is intensive operational management including services beyond just property management.

“The lease clearly describes those services and how they are paid for.

“Providers are responsible for being completely transparent on the different fees that property owners pay and ARCO, with the support of the retirement living market, has worked hard to create a consumer code which we fully support.

“If leasehold is modified we will need to ensure in the future it allows for provision of a full range of services or that a form of tenure exists which can ensure the continued supply of much needed housing with care.”

Jonathan Frankel, a specialist in leasehold enfranchisement law, at Cavendish Legal Group, added: “This will be extremely welcome news for millions of people who have felt trapped due to the way leasehold agreements were weighted too heavily in favour of the freehold owner.

“These reforms give those people the opportunity to effectively extend their lease forever, going from 50 or 90 years up to 990.

“This was the recommendation of the Law Commission which we have always supported.

“Not only will it provide security for the homeowner, but also ensures they will be able to maximise the value of the property when it comes to selling, as it will be a lot more appealing with a longer lease term.

“It’s likely this reform will open the floodgates and lead to thousands of homeowners wishing to extend their lease now that they can.

“However, it’s important to remember that this is still a fairly specialist area of property law and conveyancing.

“Brokers working with clients who are looking to extend their lease should be looking to work with conveyancers which have a track record in this area and understand the law around leasehold enfranchisement.

“At ONP, we are specialists in the area of leasehold enfranchisement, dealing with several thousand cases each year.

“We are expanding our dedicated department and introducing new technology to make the process quicker, more efficient and ultimately less costly.

“Without that expertise in place to ensure a smooth process to extend the lease or buy the freehold, homeowners could yet be left disappointed, which is not the purpose of these reforms.”


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