Major Shake Up Of Leasehold Rights

Plans are afoot for millions of leaseholders in England to be given the right to extend their leases by 990 years while paying ￡0 ground rent, the Housing Secretary Robert Jenrick has announced in a move described as being one of ‘the biggest reforms to English property law for 40 years’.

The Government says the planned reforms – which are based on recommendations made by the Law Commission – are set to save leaseholders ￡1,000s if not ￡10,000s.

These latest changes (once brought into law) would mean both house and flat leaseholders will be able to extend their lease to last for 990 years with a ground rent of ￡zero.

A cap will also be introduced on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder. Furthermore, 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 also plans to abolish ‘marriage value’ charges. Marriage value is the additional market value of a property when it has a longer lease. As the freeholder grants any lease extensions, any increase in the property value (from a lease extension) currently has to be shared equally between the freeholder and leaseholder. So, at the moment, leaseholders are under pressure to extend their lease before it falls below 80 years in length when they become liable to pay ‘marriage value’ on top of the costs of the lease extension as this can be costly with properties having shorter lease terms being harder to sell.

The Government is also proposing further measures to protect the elderly and retirees that will not only restrict ground rents to zero for new leases but also for leasehold properties built specifically for older people, so purchasers of these homes have the same rights as other homeowners.

Leaseholders will also be able to voluntarily agree to a restriction on the future development of their property to avoid paying ‘development value’, which is a premium usually placed on property leasehold or freehold values if the property in question has the potential to go up in value, for example by adding another floor, like a penthouse.

Housing Secretary Rt Hon Robert Jenrick MP 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.”