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Leasehold reforms to ‘end some of the worst practices’

10 January 2021

Millions of leaseholders will be given the right to extend their lease by a maximum term of 990 years at zero ground rent as part of the Government’s clampdown on the high cost of extending a lease.  

Under the current law many people face high ground rents, which combined with a mortgage, can cause costs to escalate.

The changes mean that any leaseholder who chooses to extend their lease on their home will no longer have to pay any ground rent to the freeholder, eliminating the bureaucracy and extra expense. For some leaseholders, this move could save tens of thousands of pounds. 

The Government estimates that it will affect some 4.5 million leaseholders. 

Housing secretary Rt Hon Robert Jenrick said the changes would reinforce the security that home ownership brings by halting “some of the worst practices” faced by homeowners. 

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.”

Jonathan Frankel, specialist in leasehold enfranchisement law, Cavendish Legal Group, said the news would be welcomed by millions of people who are “trapped” by the current leasehold agreements. 

Frankel said: “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.”
 
Mark Hayward, chief policy adviser, Propertymark, added: “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. 
 
“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.”

The Government is also 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 allows homeowners to own their property on a freehold basis, giving them greater control over the costs of home ownership. 

Professor Nick Hopkins, commissioner for property law, Law Commission, said: “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.”

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