On the 7th of January 2021, the Housing Secretary Robert Jenrick and the Ministry of Housing, Communities and Local Government had announced wide-ranging reforms to leasehold ownership in the UK. The statement was entitled “Government Reforms make it easier and cheaper for leaseholders to buy their homes”. This is one of the biggest changes within property law for over 40 years, fundamentally making home ownership fairer and more secure, the government stated.
The key changes proposed in the Government’s announcement intends to:
- Introduce millions of leaseholders to be given a new right to extend their lease by 990 years at zero ground rent.
- Changes could save households from thousands to tens of thousands of pounds.
- The elderly, including retirement properties are also protected by reducing ground rents to zero.
Under the current law, long leaseholders face high ground rents on top of their mortgage, which can make them feel like they are paying rent on a property which is already owned. This is due to the fact that freeholders can increase the amount of ground rent with no benefit seen to those faced with the extra charges.
What is the difference between a freehold and a leasehold?
There are two types of property in the UK, those being freehold and leasehold. A freehold property is one where both the land and buildings on it are owned with no time limit of ownership. However, a leasehold property is a flat or a house where the property is owned only for a defined period but not the land which it is on.
How does this apply to existing and new leases?
As stated by the Housing Secretary, the aim of the proposed legislation is to restrict future ground rents. However, the effect on existing leases with ground rents and whether they will be at any benefit is unclear.
When will the proposed reforms become law?
The statement that was announced on 7th January 2021 stated that the legislation will be bought forward in the upcoming sessions of parliament.
How much will it cost me to buy a freehold or extend my lease?
An online calculator will be introduced to make it easier for tenants to find out how much it will cost them to buy a freehold or extend a lease. In the written statement the Secretary of State for Housing, Communities and Local Government also said that, where leaseholders already have a long lease, they will be given an option to buy out the ground rent without extending the terms of the lease.
Whilst we now may have a clearer idea of the Governments intentions, we are holding out for more details of the framework and how this will have an effect on property owners going forward.
Our specialist and dedicated team of landlord and tenant solicitors can assist you through the ever-changing maze of landlord and tenant legislation across all sectors of the commercial and residential real estate market. We work hard to ensure that our advice is practical, jargon-free and cost-effective at all times.
If you would like to discuss your options for extending your lease and the impact the new proposals will have, please contact David Sumner and Gemma Brown at Larcomes Solicitors.